Tag Archives: Fraud

Another Houston man charged with PPP fraud

Joshua Argires, 29, of Houston, has been charged with COVID relief fraud. He allegedly made two fraudulent applications for more than $1.1 million in forgivable loans through the Paycheck Protection Program (PPP).



The complaint alleges that Mr Argires made applications on behalf of two businesses, Texas Barbecue and Houston Landscaping. He allegedly claimed that the two companies had numerous employees and hundreds of thousands of dollars in payroll expenses.

The $956,000 Texas Barbecue loan was funded through PrimeWay Federal Credit Union, while the Houston Landscaping loan was funded by Bank of America.

The funds received on behalf of Texas Barbecue were allegedly invested in a cryptocurrency account. The funds obtained for Houston Landscaping were held in a bank account and slowly depleted via ATM withdrawals.

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

Last month, another Houston man, Jase Gautreaux, was charged with fraudulently seeking over $13 million through PPP loans.

https://www.justice.gov/usao-sdtx/pr/another-houston-man-charged-covid-relief-fraud

Houston man and disgraced lobbyist charged with $5.6m fraud

Marcus Andrade of Missouri City has been charged with conspiracy to commit wire fraud and violating the Lobbying Disclosure Act. Also charged was Jack Abramoff of Maryland.



Mr Abramoff was the center of a large corruption scandal in 2005 that led to 21 people pleading or being found guilty. Abramoff and other lobbyists grossly overbilled Native American tribes who were seeking to develop casino gambling on their reservations. Abramoff illegally gave gifts and made campaign donations to legislators in return for votes. As a result he served three and a half years in prison.

Abramoff has filed notice that he intends to plead guilty to the charges. It appears he has agreed to a settlement that will require him to repay the $50,000 in commissions he received. He will also pay $5,500 in interest. He may be subject to civil penalties arising out of a separate suit brought by the SEC against Andrade and Abramoff.

Mr Andrade developed a new cryptocurrency called AML BitCoin that purportedly would prevent money laundering and anonymous use through ‘biometric technologies’. Andrade claimed this would allow AML to comply with anti-money laundering and know-your-customer laws and regulations.

Investors misled

Between July 2017 and December 2018, Andrade raised more than $5.6 million from more than 2,400 investors by selling tokens that could later be converted to AML BitCoin. Allegedly, Andrade and Abramoff misled investors by;

  • engaging in a false ‘rejection campaign’ regarding a television commercial that they falsely stated was going to be aired during the 2018 Super Bowl. They claimed the networks and the NFL deemed the commercial too politically controversial as it involved a Kim Jong-un lookalike.
  • making false statements regarding the state of development of the technology
  • making false statements that they were about to finalize agreements with various government agencies for the use of AML Bitcoin.

Money used for personal expenses

The charging document alleges that Andrade diverted more than $1 million to buy

  • a 5-bedroom house in Sienna Plantation ($747,000)
  • a house for his father ($226,000)
  • a Cadillac Escalade ($69,000)
  • a Ford F250 truck ($60,000)

Andrade claims he is innocent and that Abramoff was working with the government to try and get him to sell the technology.

If convicted, Andrade faces a maximum fine of 20 years and a fine of $500,000 plus restitution. The government has already started legal proceedings to get the house.

https://www.justice.gov/usao-ndca/pr/lobbyist-jack-abramoff-and-ceo-rowland-marcus-andrade-charged-fraud-connection-5

Houston Funeral Director charged with PPP fraud

A Houston Funeral Director, Jase Gautreaux, has been charged with fraudulently seeking over $13 million in Paycheck Protection Program (PPP) loans.



Mr Gautreaux allegedly submitted several fraudulent loan applications to multiple banks. He applied on behalf of a business that did not exist and sought loans for a business with which he had no affiliation. He allegedly falsified the number of employees, payroll expenses, tax documents and bank account information. Mr Gautreaux ultimately received over $1.6 million in PPP funds.

Mr Gautreaux, 38, is currently a Funeral Director at Wingate Funeral Home. According to LinkedIn, until January 2020, he spent 11 years in Procurement at Tema Oil and Gas (which became part of Rosehill Resources in 2017). During that time, he also appeared to operate his own funeral home business.

Bank fraud is a crime punishable by up to 20 years in prison. Making a false statement within the jurisdiction of a federal agency carries a potential maximum sentence of five years in prison.

In the past day, there were a number of other people around the country who were charged with PPP fraud. These included;

  • Virginia couple ($1.4 million paid out), arrested as they attempted to flee to Poland.
  • Dayton, Ohio businesswoman ($1 million paid out but flagged and recalled by the bank).
  • New York opthalmologist ($630,000 paid out) already under indictment for healthcare fraud.
  • ‘Arkansas Mo’, who appeared in Love & Hip Hop: Atlanta ($3.7 million). He used some of the money to lease a Rolls-Royce
  • Fahad Shah, a Dallas-area man, was charged with a fraudulently seeking $3 million in PPP loans. He allegedly used part of the money to buy a Tesla.

https://www.justice.gov/usao-sdtx/pr/houston-man-charged-covid-relief-fraud

FTC proposes $225m fine for company that made 1 billion illegal robocalls

The Federal Communications Commission has proposed a record $225 million fine against two related Houston companies. According to the FTC, the companies made 1 billion robocalls in the first five months of 2019, primarily on behalf of clients that sell short-term, limited-duration health insurance plans. Some of the calls were for extended vehicle warranties.

In a related action, the states of Arkansas, Indiana, Michigan, Missouri, North Carolina, Ohio and Texas have also filed a complaint in the Southern District of Texas against the companies and their owners.

Houston companies, Austin owners

The two Houston companies are Rising Eagle Capital and JSquared Telecom. They are registered to a residential address in NW Houston. The owners of the businesses are John C Spiller, II and Jakob Mears. They live in Austin.

The complaint alleges that Spiller and Mears operated Rising Eagle from January 2018 to January 2020, through which they placed billions of robocalls. On January 2019, they formed a new entity, JSquared Telecom. Spiller and Mears targeted numbers on the national ‘Do not call’ Registry list.

According to the Texas Attorney General, between January and May 2019, they placed 136 million robocalls to Texas residents. Interestingly the complaint filed in court only mentions 328 million robocalls (including the other states) in the first five months of 2019, not the 1 billion mentioned by the FTC. But who’s counting!

The calls would come from a number with the same area code and prefix of the recipient in order to mislead the recipient into believing the call was coming from someone known to the recipient. This practice is called neighborhood spoofing.

FTC collection rate

The FTC appears to have little chance of collecting much of the fine in this case. According to a 2019 Wall Street Journal article, the FTC had levied $208 million in fines against robocallers, but collected only $6,790.

FTC $225 million proposed fine

Spiller – Southern district of Texas complaint 6.9.20

 

SEC bars Houston investment advisor after guilty plea

The Securities and Exchange Commission has barred Bill Hightower from association with any broker or investment advisor. This follows Mr Hightower’s guilty plea in a federal court in October 2019.

Mr Hightower had been indicted in October 2018 on 13 counts for running a $10 million Ponzi scheme between 2013 and 2018. Mr Hightower, who lives in Bellaire, was the President of Hightower Capital Group, which he founded in 2010. He worked as a broker for UBS Financial Services between 2007 and 2013 and Legacy Asset Securities between 2013 and 2015.



Just before his trial was due to start in October 2019, he pleaded guilty to two counts. One for transferring $900,000 from a trust for an elderly investor and using that money to pay back other investors and fund his personal lifestyle. For the second count, he admitted to selling $800,000 worth of ExxonMobil shares without the investor’s permission. Again he used the money to pay back other investors and fund his personal lifestyle.

As part of the plea agreement, Mr Hightower agreed that investors lost $9.5 million. He also agreed to pay back whatever amount the Court decides as restitution. He is scheduled to be sentenced in July. Mr Hightower could face up to 20 years in prison.

In a separate case, in September 2019, the Financial Industry Regulatory Authority (FINRA) ordered UBS to pay $555,000 to an 90-year old woman who claims she was defrauded by Mr Hightower. At that time, he was a broker for UBS.

https://www.sec.gov/litigation/admin/2020/34-88941.pdf

 

Missouri City Physician to pay $450,000 to resolve fraud allegations

Dr Maaz Abbasi has agreed to pay $450,000 to resolve allegations that he falsely signed home help certifications and plans of care in exchange for money. He also agreed to a three-year exclusion from participation in any federal healthcare program.

Dr Abbasi was connected with Egondu ‘Kate’ Koko. In May 2019, she was sentenced to over 15 years in prison for her role in a $20 million medicare fraud. She owned a number of home health agencies. She admitted to paying illegal kickbacks and bribes to physicians and patients for paperwork necessary for the agencies to bill Medicare.

From 2015 to 2018, Abbasi certified patients for home health services without any knowledge of their medical condition or homebound status. One of the companies owned by Ms Koko paid Abbasi approximately $6,200 in exchange for signing these fraudulent Medicare home health certifications and plans of care. Abbasi also fraudulently signed a fellow physician’s name on these certifications and plans of care without that physician’s authorization, permission or knowledge.

The agreement resolves the allegations without a determination of liability.

https://www.justice.gov/usao-sdtx/pr/missouri-city-physician-pays-nearly-half-million-resolve-illegal-kickback-and-fraud

Texas City man admits to $5 million health care fraud

Ravinder Syal, 57, of Texas City, has admitted to a nearly $5 million fraud in a Corpus Christi federal court.



Between February 2018 and March 2020, he acquired several physician practices in Harris County, Galveston County and Corpus Christi. He handled the administrative functions of the practices including staffing and billing. In each case, he switched the practices to electronic billing and hired an outside billing service, located in India, to handle patient billing.

The Defendant conspired with the outside billing firm to fraudulently bill Medicare, Medicaid, and several private health insurers. He billed for tests and services that were not rendered by a physician or performed during a patient visit.

Syal acted without the knowledge or assistance of the physicians. According to the charge sheet, this included his wife, who is a pediatrician!

He fraudulently billed services amounting to almost $4.9 million. Syal was paid $553,069 as a result of these claims.

Sentencing has been set for August 10. At that time, Syal faces up to 10 years in federal prison and a possible $250,000 maximum fine.

https://www.justice.gov/usao-sdtx/pr/texas-man-admits-role-nearly-5-million-health-care-fraud-scheme

 

Former CEO of Blue Bell charged over listeria outbreak

Blue Bell Creameries has agreed to pay a fine of $19.35 million in relation to the listeria outbreak of 2015. According to the Department of Justice, this is the second largest amount paid in resolution of a food safety matter. Chipotle Mexican Grill holds the record ($25 million).



In a related case, former CEO Paul Kruse has been charged with seven felony counts related to his alleged efforts to conceal from customers what he knew about the listeria contamination.

A few days ago, I reported that the directors of Blue Bell had agreed to a $60 million settlement with its stockholders over allegations that it misled them over the listeria outbreak in 2015. I also noted that no federal charges had been filed.

Kruse family members held CEO position from 1919 to 2017

Blue Bell is based in Brenham, TX and was formed in 1907. In 1919 E.F Kruse took over as General Manager. Various members of the Kruse family held the CEO position continuously until Paul Kruse retired in February 2017.

2015 outbreak

In February 2015, the South Carolina Department of Health and Environmental Control found listeria in ‘Blue Bell Great Divide Bar’ and ‘Chocolate Chip Country Cookie’ after a routine sample of products in a local distribution center that were manufactured in Brenham. The following month Kansas authorities identified 5 hospital patients with listeria who had eaten “Scoops” ice cream made in Brenham. They also found listeria in products made in Oklahoma.

2011 cover-up

According to the indictment, in early 2011, the employees in the Blue Bell quality control department found samples with high levels of coliform bacteria. Although coliforms do not normally cause serious illness, their presence suggests other pathogens such as listeria may be present. In April 2011 Mr Kruse ordered the quality control employee to stop sending samples to an outside laboratory that was testing for listeria. Two samples, that were sent to the lab before Mr Kruse gave the order, came back positive for listeria. It is alleged that Mr Kruse told the employee to destroy records of the presumptive positive tests.

2015 cover-up

After the February 2015 positive tests, it is alleged that Mr Kruse instructed Blue Bell driver salesmen to remove from stores the Great Divide Bar and the Chocolate Chip Country Cookie products. Furthermore it is alleged that Mr Kruse rejected sending out a draft press release acknowledging the presence of listeria. Instead he changed the wording to an ‘issue discovered with one of our manufacturing machines’.

On each count, Mr Kruse faces a maximum sentence of 20 years and a fine of $250,000.

https://www.justice.gov/opa/pr/blue-bell-creameries-agrees-plead-guilty-and-pay-1935-million-ice-cream-listeria

Kruse indictment

SEC alleges that Houston man conned the conmen

The Securities and Exchange Commission has charged two Kansas-based individuals with defrauding investors of over $3.6 million in connection with an oil and gas equipment scheme.



In February 2019 Phillip Hudnall and Todd Esh co-founded BirdDog Oil Equipment to raise funds from investors for the purported purchase and sale of refurbished oil and gas equipment. They convinced 12 investors in 5 states to invest $3.6 million in promissory notes issued by BirdDog.

The promissory note provided for a 30% return to the investor over the nine-month term of the note. The note assured investors that Hudnall had experience of completing transactions of this type. He did not.

Use of funds raised

Instead of using the money to buy and refurbish oilfield equipment, the SEC alleges that Hudnall used $1.7 million of co-mingled funds to buy 79 acres of land in Colorado. He also used $900,000 to make Ponzi-type payments to investors in prior, unrelated investments that Hudnall had orchestrated. Hudnall also used $450,000 of investor funds to buy himself a $99,000 BMW X7 and $24,000 of tickets for local sporting events.

In June 2019 Hudnall allegedly duped a Pittsburgh bank into giving him a $555,000 loan by creating a fake purchase order from a large oilfield services company. He used most of the funds to pay off two investors who were demanding their money back.

Nguyen dupes the fraudsters

Hudnall and Esh only made one attempt to use the investor funds as promised. Between February and June 2019, they transferred $1.2 million to Duc ‘Doug’ Nguyen’, a 56 year-old man living in Houston. Nguyen told Hudnall and Esh that he had procured oilfield equipment from a major oil company and had an end-buyer lined up to buy the equipment once it was refurbished.

Nguyen instead gambled away $615,000 of the money in Las Vegas. He also gave over $85,000 to friends and family. $21,000 was used to buy a new car (presumably not a BMW).

Nguyen has not been charged in this case. Rather he is a ‘relief defendant’. That’s a term for someone who has received ill-gotten funds as a result of the illegal acts of the other named defendants. A relief defendant is typically named because the plaintiff(s) seeks injunctive relief to protect the sought funds or assets and apply them to any eventual recovery in the case.

https://www.sec.gov/litigation/litreleases/2020/lr24803.htm

Rice University to pay $3.7 million to resolve fraud allegations

Rice University has agreed to pay the Federal Government more than $3.7 million to resolve claims that it improperly charged the National Science Foundation (NSF) research and development awards.

As of March 2020, Rice had 215 active NSF research grants. The funds support basic research. Back in 2016, authorities began an investigation of Rice’s suspected misuse of NSF grant funds.

Specifically, Rice allegedly budgeted for graduate student stipends in its research grant proposals. However, it then used a portion of the money to pay the students to perform teaching duties unrelated to the NSF awards. From November 2006 to September 2018, Rice knowingly engaged in a pattern and practice of improperly charging graduate students’ stipends, tuition remission and related facilities and administrative charges to NSF awards.

To settle the allegations, Rice has agreed to pay $$3,754,186. That’s double the loss to the United States.

https://www.justice.gov/usao-sdtx/pr/rice-university-pays-resolve-claims-it-defrauded-federal-grant-program