Tag Archives: Fraud

Former CEO of Houston public company arrested for securities fraud

Jeff Hastings, the former CEO of SAExploration, has been arrested in Anchorage, Alaska on charges of wire fraud and securities fraud. He will face charges in the Southern District of New York.



SAEX is a seismic company that had significant operations in Alaska. It is based in west Houston and recently filed for Chapter 11 bankruptcy Back in February, the company restated its financial results, going back to 2014. It alleged that Hastings and former CFO Brent Whiteley misappropriated nearly $17 million between 2012 and 2019.

Whiteley hasn’t been charged with any crimes. In the FBI complaint, he is named as ‘Co-conspirator 1″. The FBI states he has ‘agreed to assist law enforcement, in part, in hopes of entering into a cooperation agreement with the Government’.

Two other co-conspirators are mentioned in the complaint, by title, though not by name. Brian Beatty, the founder and COO until December 2019, is ‘CC-2’. Michael Scott, the VP of Operations is ‘CC-3’. He resigned from his position at SAEX on September 14.

The Scheme

The complaint alleges that the scheme began in February 2015 when the CEO and CFO discussed ways for SAEX to take advantage of tax credits offered to seismic companies by the State of Alaska to help offset the costs of exploring for oil and gas in the state. The problem for Hastings and Whiteley was that the Board of SAEX was against the idea of the company operating its own data library.

In May 2015 Hastings and Whiteley set up Alaskan Seismic Ventures (ASV) as a seismic data library company that would buy seismic data from SAEX and lease it to E&P operators. However, they hid their involvement and control over ASV from the Board and investors.  To get the state credits, the company was required to conduct transactions with SAEX on an arm’s length basis.

The CEO and CFO learned that lenders were willing to make loans to ASV, if ASV was able to demonstrate it had substantial capital. $12 million of fake invoices to another company secretly controlled by Hastings allowed SAEX to send $6 million to ASV.

Unfortunately, the lenders decided not to provide funding to ASV. Hastings and Whiteley decided to send $5.8 million back to SAEX as partial payment for the seismic data it acquired.

The remaining $6 million was allegedly misappropriated by Hastings and the co-conspirators for their own personal use.

Other issues raised by the company

When the company restated its results it also said that

  • From 2012 to 2019, payments of $4.1 million were made to a company called RVI Consulting. This was secretly controlled by Mr Whiteley. The payments were originally recorded as legal and professional expenses.
  • There was a misappropriation of $0.5 million in 2013 in relation to the reimbursement of the individual tax liability of Mr Hastings.

These two items are not part of the charges brought against Mr Hastings.

HastingsComplaint

Houston woman charged with $1.9 million PPP loan fraud

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

Pain doctor pays to settle allegations of deceptive Medicare billing

Dr Syed Nasir has paid $530,000 to settle allegations that he falsely billed Medicare for the use of electro-acupuncture devices.



From March 2019 to October 2019, Dr Nasir billed Medicare for the implantation of neurostimulator electrodes. This is a surgical procedure that usually requires the use of an operating room.

However, Dr Nasir did not perform these surgeries. Instead, he applied a device used for electro-acupuncture. This procedure involves inserting needles into patients’ ears with the neurostimulator taped behind them with an adhesive. Medicare does not reimburse for electro-acupuncture devices as implantable neurostimulators.

Dr Nasir runs Skilled Pain Care Clinic, which is on the 610 loop on the NW side of Houston.

In June, Dr Jaime Robledo of Katy paid $100,000 to resolve similar allegations.

https://www.justice.gov/usao-sdtx/pr/pain-doctor-pays-settle-allegations-deceptive-medicare-billing

NASA Researcher at Texas A&M arrested for hiding Chinese connections

Zhengdong Cheng, a Texas A&M Professor conducting research for NASA, has been arrested and charged with concealing his connections with Chinese universities and at least one Chinese-owned company.

Cheng gained his PhD at Princeton in 1999 and joined Texas A&M in 2004. He became a Professor in 2017. Cheng’s research primarily focuses on complex fluids and soft matter.



In April 2013, Cheng and his research team at Texas A&M received a grant from NASA worth $746,967. The grant was to cover research into the behavior of colloidal systems in the microgravity environment of the International Space Station (ISS).

The terms of the grant stipulated that no collaboration was allowed with China or any Chinese-owned company. The grant initially covered the period to August 2018 but was subsequently extended to August 2020.

China connections

Unbeknownst to those at Texas A&M, the criminal complaint alleges that Cheng was, between 2012 and 2018, the Director of the Soft Matter Institute of Guangdong University of Technology (GDUT).

Additionally, Cheng participated in China’s Talent Plans. These are programs established by the Chinese government to recruit individuals with access to or knowledge of foreign technology or intellectual property.

In 2014, Cheng also jointly formed a company focused on the design and application of microfluidic chips. The company is based in Foshan City, China.

False statements

The complaint alleges that Cheng signed forms, annually, that he followed the terms of the grant. However, Cheng published 13 research papers between 2012 and 2018 that listed his role at Guangdong University. Eight listed both his affiliations at GDUT and Texas A&M. He even obtained two Chinese patents in 2016 and 2017.

According to the complaint, one researcher on the Texas A&M team stated in an email that ‘the US-based research team hardly did any research for the Grant, As a result, Cheng turned to research performed by his team at GDUT and then passed on the results to NASA.

cheng_complaint

https://www.justice.gov/opa/pr/nasa-researcher-arrested-false-statements-and-wire-fraud-relation-china-s-talents-program

 

Former HISD employee pleads guilty in college admission scandal

Niki Williams, of Houston, has pleaded guilty in the Rick Singer college admissions scandal that has involved celebrities Lori Loughlin and Felicity Huffman. She has admitted to one count of conspiracy to commit wire fraud and mail fraud.

According to the terms of the plea agreement, the government will recommend a sentence at the low end of the sentencing guidelines, one year of supervised release, a fine, forfeiture in the amount of $20,000 and restitution.



The Key players

The ringleader of the scheme was Rick Singer, of Newport Beach, California, who ran a college prep business. He pled guilty in March 2019 and is awaiting sentencing. The other Houston resident charged in the scheme was Martin Fox. He was described in a 2011 Sports Illustrated article as an ‘Adidas Grass Roots Director of Houston’. He pled guilty in October 2019.

The other major party in the scheme was Mark Riddell of Florida. He was one who take the SAT or ACT test on behalf of the students.  Riddell was employed by IMG Academy, the renowned boarding school and athletic training facility. He pled guilty in April 2019.

The role of Williams

Williams was a Teacher’s Assistant at a high school in Houston. She was also an administrator for the ACT and SAT exams, which were held in the same school. In fact, Fox introduced Williams to Singer.

In one example given in the indictment, Riddell flew in from Florida and took the ACT test in a Houston hotel room on behalf of a student whose parents had paid Singer $50,000. Williams allegedly delivered the exam and picked it up afterwards. According to the indictment she was paid $5,000.

There’s one other defendant with Houston connections. John Wilson lives in Lynnfield, Massachusetts. He was arrested at George Bush airport in Houston.

Weatherford consultant faces trial

Wilson was one of the lead McKinsey management consultants involved in trying to turn around Weatherford (how did that work out?). Wilson allegedly paid Singer $1.5 million to facilitate his daughter’s admissions to Stanford and Harvard. He faces a jury trial next year.

https://www.justice.gov/usao-ma/pr/former-houston-independent-school-district-employee-agrees-plead-guilty-college

 

Houston man sentenced to two years for role in email fraud scheme

Joshua Ikejimba has pleaded guilty to conspiring to commit wire fraud. He was sentenced to two years in prison in the Southern District of New York.



Mr Ikejimba, who had many aliases, was part of a wide-ranging, international business email compromise scheme that ran from 2016 to July 2018. He was indicted in May 2019, along with another Houston man, Chinedu Ironuah and two Atlanta men. Mr Ironuah remains at large, while proceeding continue against the other two.

Mr Ikejimba obtained fraudulent passports in false names. He also registered shell companies and opened fake bank accounts at various banks throughout the US. Companies were tricked by fake emails and fraudulent wiring instructions into sending funds to bank accounts controlled by the syndicate. Mr Ikejimba laundered the funds at various check cashing facilities in Houston.

The defendants obtained approximately $8 million in this way. Mr Ikejimba was personally responsible for laundering $1.25 million in fraud proceeds.

Victims listed in the original indictment included

  • Intergovernmental organization in New York ($188,815)
  • Foreign-based healthcare company ($41,495)
  • Foreign-based manufacturing company ($123,895)

In addition to the 24-month prison term, Mr Ikejimba was sentenced to three years of supervised release. He was further ordered to forfeit $1,250,766.03, and to pay restitution to his victims in the amount of $1,238,748.93.

https://www.justice.gov/usao-sdny/pr/texas-man-sentenced-two-years-prison-participation-multimillion-dollar-business-email

 

 

Mother and stepson sent to prison for $7 million bank fraud

Leyla Wydler and her stepson, Carlos Wydler, have been sent to prison following their conviction by a jury in March 2017. The mother was sentenced to 11 years in June, the step-son got 7 years today.

Leyla Wydler was the owner of several Houston-area businesses including Globan Mortgage Company, Casa Milagro and First Milagro. In 2007, Farmers and Merchants Bank of Long Beach, a California Bank, hired Carlos Wydler. He was in charge of the bank’s credit card department.



Leyla would sent credit card applications to the bank, Carlos would approve the requests for high credit lines, but would ‘advance’ the entire credit line to the borrower via wire or check. Leyla would take a fee from the borrowers’ loan proceeds. The scheme ran for about a year.

The mother and stepson were developing a real estate project in Houston and used the proceeds to finance investors in their project.

Leyla Wydler skimmed more than $1.4 million from loan proceeds. Carlos Wydler approved approximately $600,000 more in unauthorized loans to family members. More than half of the Texas borrowers run through the Wydler-family business in Houston defaulted on their loans. The bank sustained a loss of nearly $7 million.

The defendants were convicted of conspiracy, bank fraud, false statements on credit applications, wire fraud and mail fraud. Carlos Wydler was also found guilty on six counts of misapplication of bank funds.

Carlos Wydler was ordered to pay $6.8 million in restitution. Leyla Wydler was ordered to pay $6 million.

https://www.justice.gov/usao-sdtx/pr/former-banker-and-mortgage-broker-sent-prison-defrauding-california-bank

Houston man charged with spending COVID relief funds on Lamborghini

Lee Price III, who lives in NW Houston, has been charged with fraudulently obtaining more than $1.6 million in Paycheck Protection Program (PPP) loans. He allegedly spent the money on having a good time, including $233,337.60 on a 2019 Lamborghini Urus.

In case you are thinking that you read about this case last week, no, that was a Florida man who used his PPP funds to buy a $318,000 Lamborghini Huracan.



According to the criminal complaint, Price has a felony conviction for forgery (2010) and for robbery (2010). He is also currently a defendant in Harris County, where he is charged with the felony offense of tampering with a government record.

Price purported to be an executive of Price Enterprise Holdings, Price Logistics Services and 713 Construction LLC. Although these entities exist, they have never filed with the Texas Workforce Commission. That means they have not hired employees or paid unemployment taxes.

PPP applications

Price made six applications for PPP funds. However only two were funded, namely;

  • $937,500 by Radius Bank, Boston
  • $752,452 by Harvest Small Business Finance in California.

For the loan financed by Harvest, Price filled out the forms using the name of an elderly man who had died a month before. On this application, Price had an unnamed co-conspirator, who received $250,000 of the funds received.

Wine, women and song (…and an office lease)

According to the complaint, the day he received the funds from Radius, Price bought a $14,000 Rolex watch. The day after, he bought the Lamborghini. The following days saw him spent $700 at a liquor store, $2,000 at a strip club and $2,500 at two Houston night clubs. Later Price paid $100,000 as a deposit on a property in north Houston. He also spent $108,000 on a lease of new business office space (!) in Memorial City.

For the funds received from Harvest, the complaint alleges Price bought a 2020 Ford F-350 for $85,000 and leased a luxury apartment in midtown Houston. $85,000 was also withdrawn in cash.

Price is charged with making false statements to a financial institution, wire fraud, bank fraud and engaging in unlawful monetary transactions.

Price becomes the third Houston-area man to be charged with fraud in connection with PPP loans. A Funeral Director was charged in June. A 29-year old man (same age as Price) was charged in July.

https://www.justice.gov/usao-sdtx/pr/houston-entrepreneur-charged-spending-covid-relief-funds-improper-expenses-including

Houston tax preparers indicted for false filing of tax returns

Two Houston-area woman have been indicted on 32 counts related to the false filing of tax returns.

Rita Rogers and Joi Lin Hunt owned Caliente Xpress Tax Service in Sharpstown, Houston. The business started in 2014. At its peak, the business had 12 employees.



According to the indictment, they allegedly prepared returns for customers for the 2013-2016 tax years that included false schedules on 1040 forms. These claimed company losses for customers who did not own any businesses and had no such expenses.

The indictment further alleges Hunt and Rogers did not inform customers that the 1040 forms were being prepared on their behalf. Although the taxpayers would collect the refunds, Caliente Xpress charged fees ranging from $300 to $600 to prepare the return.

During the 2013-2016 tax years, Hunt and Rogers prepared 2,613 tax returns, according to the indictment. 98% received refunds, totaling $13.5 million. For 66% of these, Caliente allegedly claimed fictitious expenses on a Schedule 1040.

It appears that, during 2016, taxpayers started getting letters from the IRS that their 2013 or 2014 tax return was under audit. An undercover IRS Special Agent later visited the business in February 2017, posing as a taxpayer needing a return prepared. Rogers initially prepared a correct tax return that reported a tax due to the IRS. She then, allegedly prepared another return, claiming false expenses and a refund due. Hunt transmitted the return to the IRS.

If convicted, both face up to five years imprisonment and a possible $250,000 maximum fine.

Caliente Xpress indictment

https://www.justice.gov/usao-sdtx/pr/two-houston-area-tax-preparers-indicted