Tag Archives: Fraud

Houston man indicted in $1.3 million Regions Bank fraud

Julius Joachim Ohumole, aged 34, has been indicted in a $1.3 million fraud involving Regions Bank. He is charged with one count of conspiracy, four counts of bank fraud and two counts of aggravated identity theft.



In early December 2018, Mr Ohumole, using false information, opened a bank account in the name of Mars Construction at a Regions Bank branch in Houston.  An unknown co-conspirator accompanied Mr Ohumole to the bank and presented a false driver’s license as a means of identification to be added as a co-signor to the newly-opened bank account. The co-conspirator also provided an actual social security number of a real account customer at Regions.

4 withdrawals, $1.3 million

Somehow Mr Ohumole was able to gain access to the account of the real customer at Regions. On January 4, $274,000 was transferred from the real Regions account to the Mars Construction account. Four days later, another $200,000 was transferred.

In late January 2019, Mr Ohumole repeated the con with another newly-created account in the name of JMW Holt Constructions and a different real Regions customer. This time $815,000 was transferred in two separate transactions, six days apart.

The monies were then wired to an account in New York and then to an account overseas.

Each count of conspiracy and bank fraud carries a possible sentence of up to 30 years in federal prison. The aggravated identify theft charge carries up to two years, upon conviction. Each conviction also carries a possible $1 million maximum fine.

Regions Alabama employee guilty

In writing this story I came across another case involving Regions. Back in March 2019, a Regions Bank employee in Alabama pleaded guilty to accessing records of four wealthy customers without authorization. He passed on the information to outside co-conspirators who impersonated bank customers to make large withdrawals. The total losses were $300,000. These cases took place between February 2017 and March 2018 and are apparently unrelated to Ohumole.

https://www.justice.gov/usao-sdtx/pr/local-man-indicted-1-million-identity-theft-scheme

Founder of school academy charged in financial conspiracy

Richard Rose, the founder and Superintendent of Zoe Learning Academy has been indicted on 18 counts on charges of conspiracy, mail fraud, theft of government funds, money laundering and false bankruptcy declarations.



Zoe Learning Academy was an open enrollment charter school and was based in the Greater Third Ward area of Houston. It also had a campus in Duncanville, a suburb of Dallas.  The school started in 2001 and operated until it abruptly closed in September 2017.

Rose is alleged to have diverted funds from the charter school to fund personal expenses such as settling a personal lawsuit, paying personal legal expenses and buying a timeshare in Honolulu, Hawaii.

Rose was also the pastor of Life Tabernacle, a church on Cullen Boulevard. In 2013 Mr Rose was sued by a financial investor for not making payments on a $2.8 million real estate loan for the church. Mr Rose settled for $75,000 and allegedly used funds from the charter school to pay it. He also used $30,000 from the school to pay his legal expenses.

According to the indictment, Rose failed to disclose to the Texas Education Agency that the school paid more than $1 million for bus services to a company owned by Rose’s brother. He also failed to disclose payments to his wife of $60,000.

When Rose filed for Chapter 7 bankruptcy in October 2017, he stated that the Academy’s revenue was $263,000, when, in fact it was in excess of $2.8 million. He also stated that the Academy had not made any payments to insiders in the year prior to the Academy filing for bankruptcy.

Rose indictment

State of Texas agrees to pay $15 million to resolve errors in administering food stamp program

The Texas Health and Human Services Commission has agreed to pay the federal government $15.3 million to resolve allegations that it violated the False Claims Act in its administration of the Supplemental Nutrition Assistance Program (SNAP). SNAP was known as the Food Stamp program until 2008.



Under SNAP, the US Department of Agriculture provides eligible low-income individuals and families with financial assistance to buy nutritious food. Although the federal government funds the benefits, it relies on the states to determine whether applicants are eligible and to administer the scheme.

Furthermore states are required to perform quality control to ensure that eligibility decisions are accurate. The federal government also pay performance bonuses to those states that report the lowest error rate and the most improved error rate. The state of Texas contracted with Julie Osnes Consulting LLC (based in South Dakota) to provide advice and recommendations designed to lower its quality control error rate. The federal government alleged that the recommendations injected bias into the quality control process, resulting in the state receiving performance bonuses in 2010, 2013 and 2014 for which it was not entitled.

This is the fourth state that the Federal government has settled with. All hired Osnes Consulting. The other states are Virginia ($7 million), Wisconsin ($7 million) and Alaska ($2.5 million). The government has also settled with Julie Osnes herself ($0.8 million).  The state of Mississippi is also under investigation.

Although the details concerning the Texas program have not been released, from reporting in other states, it is alleged that the consulting firm would pressure state employees to either reclassify errors as correct or omit them from the sample.  The states would select a quality control sample and the federal government would audit a subset of the state’s sample.

https://www.justice.gov/opa/pr/texas-health-and-human-services-commission-agrees-pay-over-15-million-resolve-false-claims

 

Houston woman charged with embezzlement

A Houston woman, Beverly Davis, has been charged with embezzlement and theft of assets from her employer, a local labor union.

Ms Davis was an employee of the Communications Workers of America Local 6222. The local represents AT&T workers and is based in the Greenspoint area of Houston. The charges allege that from 2010 to 2017 she used union funds to pay for personal expenses and other authorized charges.



According to the Information sheet filed in the Southern District of Texas, the amount involved is $85,537. The charge sheet doesn’t give any more details than what is listed in the press release. There are no details of the personal expenses or how she was able to carry out the alleged embezzlement.

If convicted, Davis faces up to five years in federal prison and a possible $10,000 maximum fine.

[Update 12-13-19 Ms Davis has pleaded guilty. Also pleading guilty is Evelyn Smith. Ms Smith was the secretary/treasurer between 2005 and 2018. She took $50,968 in union funds between 2011-2018]

https://www.justice.gov/usao-sdtx/pr/local-woman-charged-embezzling-thousands-her-job

Houston Engineering Company pays $1.6 million to settle campaign finance violations

Dannenbaum Engineering, a major civil engineering contractor, has agreed to pay a $1.6 million fine for its involvement in campaign finance violations.



The company built parts of the Sam Houston Tollway, the Hardy Toll Road and taxiways at both Houston airports.

CEO recently stepped down

The former CEO of Dannenbaum, 80-year-old James Dannenbaum, has been separately charged for his role in the scheme. Mr Dannenbaum is a former Regent of the University of Texas (appointed by Rick Perry). He also serves on the boards of MD Anderson Cancer Center and until recently, the Greater Houston Partnership.

Also heavily involved was Louis H Jones, the Director of Dannenbaum’s South Texas region. Mr Jones lived in McAllen.  He died by suicide in October 2018.

The Scheme

The company admitted to making $323,300 in illegal contributions between 2015 and 2017

The scheme involved employees of the company making campaign contributions in their own name and then, secretly, being reimbursed by the company. The individuals and the campaigns involved are not named in the Information document filed in court in early November. However, searches of the database of the Federal Election Commission reveal the true recipients.

  • Kevin Brady (R) – House Representative for the 8th District of Texas (which covers the Woodlands and Huntsville). In February 2017, Brady’s campaign committee received a total of $10,000 from Jones and three employees (one based in Houston, the other two in South Texas).
  • John Cornyn (R) – Senior Senator for Texas. Cornyn’s campaign committee also received  total of $10,000 from the same individuals in February 2017.
  • Filemon Vela (D) – House Representative for the 34th District of Texas (which covers the Gulf Coast between Brownsville and Corpus Christi). Jones donated $2,500 to Vela’s campaign.

The company reimbursed Jones for the total amounts paid. In the company books, these were disguised as marketing advances. In turn, Jones issued personal checks to the three employees involved.

It’s interesting that the amounts involved quickly snowballed from the $22,500 disclosed in the Information document filed in early November to the $323,300 disclosed in the settlement agreement. The company has a new CEO, Michael Maksoud, who has vowed to restructure its board and stop all politically-related payments to its employees.

Perry and McCarthy big beneficiaries

A breakdown of the $323,300 has not been made public. While politicians from both parties appeared to receive donations, the two biggest recipients according to the FEC records were Rick Perry’s Super PAC (at least $90,000) and Kevin McCarthy’s committees (at least $38,500).

In the same period James Dannenbaum made almost $0.5 million in legal contributions to various candidates. They were mostly Republican including the Cruz, Perry and Rubio Presidential campaigns. However he also donated to Houston Democrats such as Al Green and Sheila Jackson Lee.

https://www.justice.gov/usao-sdtx/pr/houston-engineering-corporation-enters-corporate-resolution-and-agrees-pay-16-million

 

 

Harris County judge charged with fraud

Judge Alexandra Smoots-Thomas has been indicted on allegations of wire fraud. Since 2009, she has served as the presiding judge for the 164th District Court for the State of Texas. She has jurisdiction of Texas civil cases located within Harris County.



Beginning in early 2013, the indictment alleges that Smoots-Thomas used funds donated to her campaign for personal expenses unrelated to the campaign. She then hid her misuse of these funds by filing false campaign finance reports with the Texas Ethics Commission and concealing her activity from her campaign manager.

The indictment lists 7 transactions for a total of $24,890 where Smoots-Thomas allegedly used the campaign account for personal use. $11,809 was used to pay a home mortgage and $9,942 to The Regis School for tuition. An airfare, a Prada handbag and a ring from Zales comprise the other transactions.

Each of the seven counts of wire fraud carries a possible sentence of up to 20 years in federal prison as well as a maximum $250,000 fine.

Smoots-Thomas was the presiding judge over the initial phase of the TechnipFMC – McDermott lawsuit involving COO Sumit Mukherjee. Smoots-Thomas was replaced as the judge on the case just before the parties were set to go to trial as she was diagnosed with breast cancer. She is still receiving treatment for the cancer.

Smoots-Thomas indictment

https://www.justice.gov/usao-sdtx/pr/local-judge-charged-fraud

80-year-old man convicted in $19 million medicare fraud

Bobby Rouse Sr, an 80-year-old former Houston man, has pleaded guilty to conspiring to pay and receive kickbacks and money laundering related to the Medicare program.



Mr Rouse becomes the 14th and final person convicted in relation to the scheme. Rouse and three others were part of the executive team for Continuum Healthcare LLC. They owned the Westbury Community Hospital (now closed) in Houston. The company also owned mental health centers in Hornwood, Baytown and Missouri City.

Each location operated a partial hospitalization program (PHP), a short-term intensive treatment program but without 24-hour daily care. Numerous people were referred to treatment in exchange for payment. However the vast majority did not qualify for PHP services because they were not experiencing an acute psychotic episode or were actually suffering from dememtia or Alzheimer’s.

Six of the defendants owned personal care homes while four were marketers for Continuum. Each admitting payments to refer the patients, receiving amounts ranging from $130,000 to $2.6 million each.

In all, Continuum billed Medicare approximately $189 million for fraudulent PHP claims and Medicare paid $66 million on these claims. Mr Rouse admitted to causing Medicare to pay $18.8 million based on false and fraudulent claims. For Mr Rouse, the scheme ran from March 2005 through May 2012.

Mr Rouse will be sentenced in January 2020. He faces up to 10 years in prison and a possible $250,000 maximum fine.

Ten of the defendants were originally indicted in 2014 though Mr Rouse was not charged until 2017. This followed an investigation by the Houston Chronicle back in 2011.

https://www.justice.gov/usao-sdtx/pr/final-defendant-convicted-189-million-health-care-fraud-scam

Monaco-based brothers plead guilty to bribery scheme

Cyrus Ahsani and Saman Ahsani, CEO and COO of Monaco-based Unaoil, have pleaded guilty in a scheme to make millions of dollars in bribe payments to officials in multiple countries. The countries included Algeria, Angola, Azerbaijan, the Democratic Republic of Congo, Iran, Iraq, Kazakhstan, Libya and Syria.



Guilty plea in March

The pair pleaded guilty in the Southern District of Texas back in March, but the Department of Justice only announced the news today. It’s not clear why there has been a delay. However it does answer the question of why the United Kingdom’s Serious Fraud Office suddenly dropped its fraud investigation into Unaoil back in June.

Cyrus and Saman Ahsani are set for sentencing April 20, 2020.

Companies involved

Unaoil is an intermediary company that provided services for multinational companies operating in the energy sector. The information sheet lists two companies specifically;

  • Rolls Royce plc (paid £170 million in fines to the UK authorities in 2017, specifically related to Unaoil)
  • SBM Offshore NV (paid $475 million in fines worldwide in 2017 – some related to Brazil which don’t involve Unaoil)

A further 25 companies are unnamed, of which 5 have their head office in Houston.

Many of these companies have been named through previous press reports. They include;

  • TechnipFMC (paid SEC $5m to settle bribery allegations in Iraq)
  • KBR (allegedly paid Unaoil over $10 million to help it win contracts in Kazahkstan. DOJ and SEC investigations still ongoing)
  • Baker Hughes (investigation ongoing)
  • Weatherford
  • Cameron
  • Core Labs (investigation closed – no action taken)

Other companies involved include Honeywell, ABB, Samsung and Hyundai.

Downfall

Unaoil’s downfall started as a result of a 2013 court case involving an Australia company, Leighton Holdings. It had entered into an agreement with Unaoil with the aim of securing a $500 million Iraq pipeline contract but later referred the deal to the police for possible bribery.

Nick McKenzie, an Australian journalist started following the case and was soon contacted by a whistleblower who gave him a hard drive containing 10 years’ worth of internal Unaoil emails.

You can read the investigative report by The Age newspaper here

Ahsani charges filed by DOJ

https://www.justice.gov/opa/pr/oil-executives-plead-guilty-roles-bribery-scheme-involving-foreign-officials

Freight forwarding company owner pleads guilty to price fixing

Francis Alvarez, owner of a freight forwarding company, has pleaded guilty to an antitrust charge for her role in a multi-year, nationwide conspiracy to fix prices for international freight forwarding services.



The original charges were filed in the Southern District of Florida in Miami. According to the charges Alvarez and her co-conspirators agreed to fix prices, primarily for shipments to Honduras between September 2010 and August 2014. They held meetings where they discussed prices to be charged for freight services, exchanged pricing information and raised prices in accordance with the agreement.

Alvarez has agreed to pay a criminal fine and cooperate with the ongoing investigation. She will be sentenced at a later date. Alvarez owns Servicios Hondurenos which is based just north-east of downtown Houston.

Roberto Dip (who owned Dip Shipping, a freight forwarding company in New Orleans) and Jason Handal (a company manager for Dip) pleaded guilty in November 2018. In June, they were sentenced to 18 months and 15 months prison terms, respectively. The individuals each paid a $20,000 fine while the company paid a $488,250 criminal fine.

The ongoing investigation into price fixing in the international freight forwarding industry is being conducted by the Antitrust Division’s Washington Criminal I Section and the FBI’s New Orleans Field Office.

https://www.justice.gov/opa/pr/third-freight-transportation-executive-pleads-guilty-antitrust-charge

Houston sports manager to plead guilty in college admissions bribery scheme

Martin Fox has agreed to plead guilty to one count of conspiracy to commit racketeering in connection with his role in the Rick Singer college admissions bribery case. The case also ensnared actresses Felicity Huffman and Lori Laughlin.

[Update 11-15-19 Mr Fox has now pleaded guilty]

The prosecutors will recommend a sentence at the low end of the sentencing guidelines (range is 21-27 months). Mr Fox could have received up to 20 years in prison. He will also face a fine and restitution.



The bribery scheme

Fox introduced Rick Singer to Michael Center, the tennis coach at the University of Texas in Austin, who facilitated the admission of a student to UT as a purported athletic recruit in exchange for a bribe. Singer paid Fox $100,000. Fox also arranged two similar bribes with a coach at the University of San Diego. He was paid $100,000 for one and $10,000 for the other (the second student ended up not going to USD).

Center has pled guilty and will be sentenced in February 2020.

Adidas Grass Roots Director

Mr Fox is described by the Federal Government as a former President of a private tennis club. He may have been that, but is primarily a sports money man/entrepreneur.  His twitter feed (before it was made private) was full of pictures of Fox with famous sporting figures. In 2011, Sports Illustrated had described Fox as an “Adidas ‘Grass Roots Director of Houston’ (in that article they estimated that Fox had lost $249,000 in the Ponzi scheme run by Houston money manager, David Salinas).

Fox’s name turned up late last year in court proceedings concerning the college basketball corruption trial involving two Adidas officials and aspiring agent. The defense lawyers in that trial had argued that $40,000 of the money paid to Kansas basketball players, came, not from Adidas but from Martin Fox (who didn’t directly work for Adidas). No wrongdoing was alleged against Fox in that trial. The defendants were found guilty after a three-week trial.

SAT administrator

The other Houston-based defendant is Lisa ‘Niki’ Williams. She was a Teachers 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.  Fox introduced Williams to Singer. The case against her is still pending.

Weatherford

There is a third defendant with Houston connections. John Wilson lives in Lynnfield, Massachusetts but was arrested at George Bush airport in Houston. He is a Harvard business school graduate who runs a financial services firm, Hyannis Port Capital. He is also a former CFO at Staples.

Mr Wilson was one of the lead McKinsey management consultants involved in trying to turn around Weatherford before it filed for bankruptcy. Wilson allegedly paid Singer $1.5 million to facilitate his daughter’s admissions to Stanford and Harvard. The case against Mr Wilson is still ongoing.

https://www.justice.gov/usao-ma/pr/former-president-private-tennis-academy-agrees-plead-guilty-college-admissions-case