Tag Archives: Fraud

Houston woman charged with $3.6 million PPP loan fraud

LaDonna Wiggins, 37, has been charged with bank fraud and money laundering in relation to two Paycheck Protection Program (PPP) loans. She received $3.6 million and allegedly used these funds to buy two houses, multiple vehicles and luxury goods.



She made two loan applications for her businesses Wiggins & Graham Enterprise, dba ‘The Concession Stand and Pink Lady Line. In May 2020, she submitted an application for the first business stating she had 108 employees. The application for the second business was made the following month. She stated that she had 107 employees for that business.

Both loans were funded by Kabbage, Inc, an online funding company for small business owners.

Some of the funds were allegedly spent as follows;

  • $688k for a house in Cypress, Texas
  • $248k for a house in Katy, Texas
  • $79k for a 2020 Range Rover
  • $52k for a 2020 Nissan Murano
  • $63k at Chanel
  • $188k on a new swimming pool
  • $180k on construction work
  • $6k on an aquarium and tropical fish
  • $200k to buy an unnamed business

If convicted, Wiggins faces up to 30 years in federal prison and a possible $1 million maximum fine. The government also intends to seize the remaining cash in her bank accounts (approx. $0.5 million), the two houses and the Range Rover.

Wiggins indictment – pdf

https://www.justice.gov/usao-sdtx/pr/local-woman-charged-fraudulently-receiving-millions-under-cares-act

You can read about the other Houston-area residents charged with PPP fraud;
Six-houston-area-men-charged-in-16-million-ppp-loan-fraud/
Houston-woman-charged-with-1-9-million-ppp-loan-fraud/
Houston-man-charged-with-spending-covid-relief-funds-on-lamborghini/
Houston-funeral-director-charged-with-ppp-fraud/
Another-houston-man-charged-with-ppp-fraud/

Houston scientist settles grant fraud allegations

Dr. Rouzbeth Shahsavari has agreed to pay nearly $150,000 to resolve allegations that he and his company defrauded the National Science Foundation (NSF) and the Navy.



Dr. Shahsavari is the owner and chief scientist at C-Crete Technologies Ltd in Stafford, SW Houston. He started his company while completing his PhD at Massachusetts Institute of Technology (MIT).  The company is developing new uses for advanced materials using nanotechnologies and advanced computations.

The company applied for grants to NSF and the Navy in 2015 and 2016. One of the conditions of any grant was that the applicant must have a subaward agreement with a collaborating research partner. Dr. Shahsavari said he had such an agreement with Rice University when, in fact, he did not. (He is, though, an Assistant Professor at Rice).

The company also failed to notify Navy personnel that their designated principal investigator had stopped working for the company almost three months before the grant was awarded.  Assuming the allegations were true, in both circumstances, the company was ineligible to receive the $147,589 grant.

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

https://www.justice.gov/usao-sdtx/pr/houston-scientist-settles-grant-fraud-allegations

Energy trader pleads guilty for role in $1m insider trading scheme

John Ed James, 51, of Katy, has pleaded guilty to conspiracy to commit commodities fraud and wire fraud for his role in an insider trading scheme.



James was a natural gas trader and owner of his own trading firm. He worked with Marcus Schultz, who was a natural gas trader at a large company in Houston. Two other unnamed individuals, a broker and an energy trader, were also involved in the scheme.

Instead of trading futures contracts openly and competitively, Schultz disclosed to James and the unnamed broker material non-public information that he would be willing to accept on behalf of the company. The broker would arrange offsetting trades with James and the other individual. 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.

The scheme began in 2013 and ran until June 2016.

Schultz pleaded guilty in July 2020 and is scheduled to be sentenced in June 2021. In September, the Commodity Futures Trading Commission ordered Schultz to pay a penalty of $669,750 and disgorge $427,067 in ill-gotten gains. If the Federal court imposes fines or penalties on Schultz, the CFTC amounts would be offset.

Sentencing for James is set for April 2021.

The case is the first time that the Department of Justice has prosecuted insider trading in the commodity markets since the relevant law was passed as part of the Dodd-Frank Act in 2011.

https://www.justice.gov/usao-sdtx/pr/former-natural-gas-trader-pleads-guilty-role-commodities-insider-trading-scheme

Famous Houston pastor gets 6 years for $3.5 million fraud

Kirbyjon Caldwell, a famous Houston pastor, has been sentenced to 6 years in prison for conspiracy to commit wire fraud. Caldwell was ordered to pay restitution in the amount of $3,588,500, as well as a fine of $125,000.



Mr Caldwell built up Windsor Village United Methodist Church in SW Houston into a 18,000 member mega church and was a spiritual advisor to President Bush. He offered the benediction at both his inaugurations and officiated at the wedding of President Bush’s daughter, Jenna. He was also a spiritual advisor to President Obama.

Former Investment Banker

Caldwell is a former director at Continental Airlines (until 2011) and NRG Energy (he left the board one month after he was indicted in 2018).  He was also a minority owner in the Houston Texans until recently. Prior to becoming a pastor he was an investment banker on Wall Street and worked for a bond firm in Houston. He has a master’s degree from Wharton School of Business.

The fraud scheme

Caldwell was charged along with Gregory Smith, a Shreveport-based investment advisor. Smith pleaded guilty in July 2019. Smith was also sentenced to 6 years back in November.

Between April 2013 and August 2014, Caldwell and Smith raised $3,588,500 from 29 investors through a fraudulent offer and sale of various pre-1949 Chinese bonds. Caldwell and Smith falsely represented to these investors that the bonds were safe, risk-free, worth tens, if not hundreds of millions of dollars and could be sold to third parties. In reality, the bonds have no investment value.

The Chinese government doesn’t recognize the validity of bonds issued prior to the communist takeover of 1949. It has never paid out on any of these bonds, except once in 1987. As part of the negotiations over Hong Kong, the Brits received 36 cents on the dollar. The US courts have generally said that the People’s Republic of China can assert sovereign immunity in not paying these debts.

Caldwell kept approximately $0.9 million and used it to pay down personal loans, mortgages and credit cards. Smith received $1.1 million of the total monies raised.

Caldwell surrendered his clergy credentials before pleading guilty in March 2020.

At the sentencing hearing, Caldwell’s lawyers presented evidence that he has repaid his victims more than $4 million. They also pleaded for him to be confined to his home, rather than going to prison, citing his ongoing treatment for prostate cancer, as well his hypertension and the threat COVID-19 poses for those incarcerated with underlying conditions.

Caldwell was ordered to report to the Bureau of Prisons on June 22, 2021.

https://www.justice.gov/usao-wdla/pr/former-houston-texas-pastor-sentenced-federal-prison-his-role-multimillion-dollar

Houston Doctor pleads guilty to receipt of kickbacks

Dr. Ghyasuddin Syed has pleaded guilty to receiving $475,992 in kickbacks from the owner of a Houston toxicology laboratory. Dr. Syed operates a pain management clinic in Baytown.



Uday Shah, who owned and operated several labs, originally pleaded guilty in October 2019.  He was sentenced to 24 months’ imprisonment. Timothy Andrews of Deer Park, who worked as a marketer for Mr Shah, pleaded guilty in June 2019. He got 15 months.

The scheme ran from November 2014 through August 2017. Mr Shah paid kickbacks to Dr Syed, though the payments were disguised as rent payments from Mr Shah to entities controlled by Dr. Syed or his wife, Shazana Begum. In return, Dr. Syed referred urine drug testing to Shah’s labs, including Pinnacle Laboratories in Lexington, Kentucky.  Medicare paid the labs $325,739 to which they were not entitled.

Dr. Syed is scheduled to be sentenced in March 2021 in the Eastern District of Kentucky.  He faces up to five years in prison for the conspiracy to violate the Anti-Kickback Statute, and a maximum fine of $250,000.

Dr. Syed’s wife, Shazana Begum, has entered into a pretrial diversion agreement wherein she admitted her role in the offense. She agreed to be under the supervision of the United States Probation Office for 12 months, to pay restitution of $325,739 along with Shah and Andrews, and to perform community service.

It appears that the case was first brought to the attention of authorities by a lawsuit filed in 2015 by an employee at the laboratory in Kentucky. However, the lawsuit remained sealed until September 2019.

https://www.justice.gov/usao-edky/pr/toxicology-lab-owner-and-marketer-sentenced-payment-kickbacks-doctor-pleads-guilty

Houston man charged in $2 million business email compromise scheme

Marvellous Eghaghe has been arrested in Houston and charged by the US District of Virgin Islands in connection with wire fraud and money laundering schemes.



According to the indictment, Eghaghe created a Texas company and an associated bank account. He used  these to obtain money fraudulently from victims in the Virgin Islands, Alabama, Texas and Columbia. He would set up email addresses very similar to legitimate vendors, thereby diverting funds to the bank account he had created.

In particular, between February 2018 and March 2018, he is alleged to have

  • diverted $109,000 of funds intended for the closing of a home in the Virgin Islands.
  • forged over $2 million of checks from a business in Alabama.
  • diverted $48,000 of funds from a business in Texas.
  • diverted $35,000 from a business in Columbia.

Eghaghe appeared to have three co-conspirators, who were not named in his indictment. For the three smaller amounts, Eghaghe diverted most of the funds to himself and his co-conspirators. The indictment also alleges that $25,000 of the $2 million was transferred to a personal account. However, it’s not clear what happened to the rest of the money.

 

https://www.justice.gov/usao-vi/pr/houston-man-arrested-international-money-laundering-conspiracy-stretching-us-virgin

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.

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 charged with defrauding investors in oil and gas deals

Arael Doolittle has been charged with taking $1.2 million from 21 investors through fake oil and gas deals. A federal grand jury returned a 12-count indictment.

Mr Doolittle operated Sariel Petroleum and Sariel Enterprises. He had an associate, a Houston realtor, pose as a distillates trader working for Chevron. The associate established a bank account in the name of Chevron USA Products, without permission from Chevron.



In 2017 Doolittle persuaded Dominion Resources Trading (‘DRT’), a small outfit in Las Vegas to work with him to find investors for oil and gas transactions he was working on. DRT ultimately forwarded on $1.25 million from 21 investors to Sariel Petroleum. Doolittle provided falsified records to DRT that appeared to show $1,209,600 of the funds has been used to buy product from Citgo.

Doolittle created letterhead and emails that appeared to come from Chevron. He also persuaded an attorney and a banker to provide attestation letters and assurances to potential customers and investors.

In a separate case in the Southern District of Texas, Chevron sued Sariel Petroleum in January 2018 for trademark infringement. After a jury trial, Chevron was awarded a $15.6 million judgement against Sariel in April 2020.

Doolittle is charged with eight counts of wire fraud and four counts of engaging in monetary transactions in criminally derived funds. Wire fraud carries a potential 20-year-maximum sentence and a possible $250,000 maximum fine. If convicted of any of the other four counts, he faces the same fines and up to 10 years imprisonment.

https://www.justice.gov/usao-sdtx/pr/houston-man-charged-defrauding-investors-oil-and-gas-deals

Doolittle indictment

Houston software CEO charged with evading tax on $2 billion of income

Bob Brockman, 79, has been charged with tax evasion, wire fraud, money laundering and other offenses. The scheme ran for 20 years. Prosecutors say it is the largest tax fraud case against an individual in the US.



Mr Brockman has his primary residence in the Memorial Villages area of Houston. He founded Universal Computer Systems in 1970. The business supplies software to assist car dealerships in managing their inventory. In 2006, it took over a publicly-traded rival called Reynolds & Reynolds for $2.8 billion. Mr Brockman remains the CEO of the combined business, still privately-owned and based in Ohio.

Mr Brockman is a former trustee of both Rice University and Baylor College of Medicine.

Robert Smith – Co-operating with the government

At the same time that prosecutors were announcing the charges, they also issued a press release stating that Robert Smith, an Austin-based billionaire had entered into a non-prosecution agreement. Mr Smith agreed to pay $139 million in taxes and penalties . He also agreed to abandon a refund claim of $182 million that he had filed against the IRS, related to charitable contribution deductions. Most damaging, Smith agreed to co-operate with the government investigation against Brockman. The investigation of Mr Smith took four years.

Mr Smith made headlines last year when he pledged to pay off the $34 million of student loan debt for the Morehouse College graduating class.

The Scheme

Smith and Brockman met in 1997 when Mr Smith was a Goldman Sachs. At Brockman’s urging Smith founded Vista Equity Partners, a PE firm, in 2000.  Brockman invested $1 billion in the first fund. When the portfolio companies in that and subsuquent funds were later sold at a profit, Brockman used a series of offshore companies and trusts, that he secretly controlled,  to allegedly avoid paying capital gains tax.

Brockman used a proprietary, encrypted email system to communicate with the trustees and nominees that he controlled.  Each person had a codename. At one point, Brockman emailed the trustee and reminded him that

‘all copy machine/laser printer paper has encoded into it the manufacturer of that paper as well as the year and month of manufacture. For that reason I always set aside some packets of copy paper with dates on them – for potential future use.’

The trustee is also co-operating with the government.

In all, Mr Brockman faces 39 counts. If convicted, he faces a substantial prison term and restitution and criminal forfeiture.

https://www.justice.gov/opa/pr/ceo-multibillion-dollar-software-company-indicted-decades-long-tax-evasion-and-wire-fraud

Brockman indictment