Investment Advisor Admits Guilt in $10M Scheme

   NEW HAVEN, Conn. -  7/27/2011 - Gregory P. Loles, 51, of Easton, Conn., pleaded guilty today before U.S. District Judge Mark R. Kravitz in New Haven, Conn., to mail fraud, wire fraud, securities fraud and money laundering offenses stemming from a scheme to defraud investors, including a Connecticut church, of millions of dollars, U.S. Attorney David B. Fein for the District of Connecticut has announced.
   According to court documents and statements made in court, Loles owned Apeiron Capital Management Inc., which was an investment adviser and broker dealer registered with the U.S. Securities and Exchange Commission (SEC) from 1995 through 1998, at which point the registrations were cancelled. However, Loloes continued to operate Apeiron as an unregistered investment adviser and falsely represented Apeiron to be a registered investment management firm. Loles also was the majority owner and managing member of Farnbacher Loles Motor Sports, Farnbacher Loles Racing, Farnbacher Loles Street Performance and various other Farnbacher Loles businesses, which were based in Danbury, Conn. Farnbacher Loles was engaged in the business of professional race team operations and servicing high-performance automobiles.
   In pleading guilty, Loles admitted that he falsely represented to numerous victim-investors, including friends and fellow parishioners of a church in Orange, Conn., that he would act as their investment adviser and invest their funds through Apeiron in various securities including in what he described as “Arbitrage Bonds,” which Loles represented would provide investors with a safe and steady return.
   Loles also was selected to serve on the board of the church’s endowment fund and was entrusted to manage the Church’s investment funds, including the endowment fund and the Building Fund, by investing in, among other things, Arbitrage Bonds. However, the Arbitrage Bonds did not exist.
   Loles caused numerous victim-investors to invest more than $10 million with him and Apeiron. Loles failed to invest the money as represented, and instead diverted investors’ funds for his own personal use and benefit, including to pay personal expenses such as credit card bills, and to distribute a large amount of the funds to Farnbacher Loles.
   Some of the individual investors provided Loles with funds that had previously been invested in IRAs, 401(k)s, or were proceeds of life insurance payments.
   As part of the scheme to defraud, Loles provided investors with fraudulent account statements and also made periodic “lulling” payments to certain investors using a portion of other victim-investors’ funds.
   Loles also defrauded clients of Farnbacher Loles.
   The government estimates that victims have lost at least $8.7 million as a result of this scheme.
   Today, Loles pleaded guilty to one count of mail fraud, one count of wire fraud, one count of securities fraud and one count of money laundering. Judge Kravitz has scheduled sentencing for Oct. 14, 2011, at which time Loles faces a maximum prison term of 20 years, on each count, as well as an order of restitution.
   Loles has been detained since his arrest by the FBI on Dec. 15, 2009.
   The case is being investigated by the FBI, with the assistance of the SEC. The case is being prosecuted by Assistant U.S. Attorney Michael S. McGarry and law student intern Ewelina Chrzan.
  Source: U.S. Department of Justice release.

Fitch Ratings' Predicts Sluggish Growth in Steel

   NEW YORK -(BUSINESS WIRE) - 7/14/2011 - Fitch Ratings' expects slower growth in steel demand and production during the second half of 2011 as developing nations fight inflation and developed nations address fiscal instability. A positive result from lower growth expectations is slowing capacity addition; global average capacity utilization at 81 percent.
    Fitch believes tight supply of low-cost iron ore and metallurgical coal will persist into 2013 resulting in raw materials prices that should exceed 2010 levels for the period. Attractive returns on iron ore and metallurgical coal projects and the benefits from backward integration for steel producers should continue to drive merger and acquisitions activity.
    Steel producers expected to show a sustainable advantage include: 1) those with raw materials integration depending on the cost position of captive capacity; 2) producers with relatively high exposure to value-added steel products given premium pricing; and 3) producers with substantial operating scale, affording the ability to temporarily curtail production during lulls to reduce costs while serving customer demand.
    Fitch expects mining and metals producers to remain disciplined through the recovery and not stretch their investment targets or their capital structure to mitigate systematic risk and geopolitical risk.
    The Rating Outlook for the global steel and steel raw materials industry sectors is Stable, with an expectation that the recovery for steel will stretch into 2013. Fitch also anticipates a soft landing for China and a slow economic recovery for developed nations.
    The full reports 'Worldwide Steel Outlook' and 'Steel raw Materials Outlook' are available on Fitch's website at 'www.fitchratings.com.'

Loan Officer, Title Agent Charged in $2.5M Scheme

   WASHINGTON – 7/11/2011 - The Justice Department announced on July 6 the unsealing of a criminal case charging four defendants – Louis Gendason, 42, of Delray Beach, Fla.; Kimberly Mackey, 46, of Pittsburgh; John Incandela, 24, and Marcos Echevarria, 29, both of Palm Beach, Fla. – with conspiracy to commit wire fraud involving a nation-wide reverse mortgage scam that defrauded elderly borrowers, financial institutions and the Department of Housing and Urban Development (HUD).
   A reverse mortgage allows borrowers, who are at least 62 years of age, to convert the equity in their homes into a monthly stream of income, or a line of credit. Three of the defendants made their initial appearances at the federal courthouse in Fort Lauderdale, Fla., earlier in the day.
   If convicted, the defendants each face a statutory maximum term of up to 30 years in prison and a fine of up to $1 million. These charges coincide with the one-year anniversary of “Operation Stolen Dreams,” the department’s anti-mortgage fraud enforcement initiative announced by Attorney General Eric Holder last June.
    The scheme contains many of the characteristics common to mortgage fraud around the country. The information charges Gendason,  Incandela and Echevarria with using a Florida-based loan modification business known as Lower My Debts.com L.L.C. as a front to identify elderly borrowers who were financially-vulnerable. They are alleged to have in their capacity as loan officers at 1st Continental Mortgage LLC. solicited borrowers to refinance their existing mortgages with a reverse mortgage loan financed by Genworth Financial Home Equity Access Inc.
  To induce Genworth and HUD to fund and insure the reverse mortgage loans, the defendants allegedly changed the unwitting borrowers’ real estate appraisal reports to fraudulently represent equity in the properties. The information alleges that Gendason, Incandela and Echevarria originated fraudulent loans on properties located in seven different states between May 2009 and November 2010 exceeding $2.5 million.
    As a further part of the charged conspiracy, a fourth defendant, Kimberly Mackey, a licensed title agent and proprietor of the Pittsburgh title agency Real Estate One Land Services Inc., fraudulently closed the Genworth loans by failing to pay off the seniors’ existing liens. Instead, Mackey wired nearly $1 million in Genworth loan proceeds to the business checking account for Lower My Debts.com. She conspired to conceal the fraudulent loan closings from financial institutions by preparing written settlement documents which falsely represented that the borrowers’ existing mortgages had, in fact, been paid off.
   In some instances, after Mackey wired the loan proceeds to bank accounts in Florida controlled by her co-conspirators, she is alleged to have assisted them with defrauding the banks holding the borrowers’ first mortgages by negotiating fake short sales. This was designed to induce these banks to release their valid liens on the seniors’ properties at a fraction of their existing loan balance. All of the defendants are accused of pocketing the illegally-obtained loan proceeds.
    “Protecting Americans from financial fraud is one of our top priorities,” said Tony West, assistant attorney general of the Justice Department’s Civil Division. “With these charges, we are taking another important step in the effort we began with Operation Stolen Dreams by holding accountable those whom we believe lined their own pockets with money that should have gone to help vulnerable seniors.”
   This case was investigated by agents from the HUD-Office of Inspector General; the Internal Revenue Service-Criminal Investigation; the U.S. Postal Inspection Service; the FBI Miami Field Office; and the state of Florida’s Office of Financial Regulation. The case was prosecuted by Trial Attorney Kevin J. Larsen from the Civil Division’s Office of Consumer Protection Litigation, along with Assistant U.S. Attorneys Jeffrey H. Kay and Thomas P. Lanigan from the U.S. Attorney’s Office for the Southern District of Florida.
    Anyone with knowledge of such schemes is encouraged to contact the HUD hotline at 1-800-347-3735.
    Initiated in June 2010, Operation Stolen Dreams targeted mortgage fraudsters throughout the country and was the largest collective enforcement effort ever brought to bear in confronting mortgage fraud.  Operation Stolen Dreams targeted 1,517 criminal defendants nationwide, included 525 arrests, and involved an estimated loss of more than $3 billion. The operation also resulted in 191 civil enforcement actions and the recovery of more than $196 million.
   Source: U.S. Department of Justice release.

JPMorgan Chase Admits to Anticompetitive Action

WASHINGTON – 7/8/2011 - JPMorgan Chase and Co. has entered into an agreement with the Department of Justice to resolve the company’s role in anticompetitive activity in the municipal bond investments market and has agreed to pay a total of $228 million in restitution, penalties and disgorgement to federal and state agencies, the Department of Justice announced on July 7.
    As part of its agreement with the department, JPMorgan admits, acknowledges and accepts responsibility for illegal, anticompetitive conduct by its former employees, the department stated. According to the non-prosecution agreement, from 2001 through 2006, certain former JPMorgan employees at its municipal derivatives desk, entered into unlawful agreements to manipulate the bidding process and rig bids on municipal investment and related contracts. These contracts were used to invest the proceeds of, or manage the risks associated with, bond issuances by municipalities and other public entities.
    “By entering into illegal agreements to rig bids on certain investment contracts, JPMorgan and its former executives deprived municipalities of the competitive process to which they were entitled,” said Assistant Attorney General Christine Varney in charge of the Department of Justice’s Antitrust Division. “Today’s agreements ensure that JPMorgan will pay restitution to the municipalities harmed by its anticompetitive conduct, disgorge its profits from the illegal activity and pay penalties for the criminal conduct. We are committed to rooting out anticompetitive activity in the financial markets and our investigation into the municipal bond derivatives industry, which has led to criminal charges against 18 former executives, remains active and ongoing.”
    Under the terms of the agreement, JPMorgan agrees to pay restitution to victims of the anticompetitive conduct and to cooperate fully with the Justice Department’s Antitrust Division in its ongoing investigation into anticompetitive conduct in the municipal bond derivatives industry. To date, the ongoing investigation has resulted in criminal charges against 18 former executives of various financial services companies and one corporation. One of these charged executives, James Hertz, is a former JPMorgan employee. Nine of the 18 executives charged have pleaded guilty, including Hertz.
    The Securities and Exchange Commission (SEC), the Internal Revenue Service (IRS), the Office of the Comptroller of the Currency (OCC), the Federal Reserve Board (Fed) and 25 state attorneys general also entered into agreements with JPMorgan requiring the payment of penalties, disgorgement of profits from the illegal conduct and payment of restitution to the victims harmed by the manipulation and bid rigging by JPMorgan employees, as well as other remedial measures.
    As a result of JPMorgan’s admission of conduct; its cooperation with the Department of Justice and other enforcement and regulatory agencies; its monetary and non-monetary commitments to the SEC, IRS, OCC, Fed and state attorneys general; and its remedial efforts to address the anticompetitive conduct, the department agreed not to prosecute JPMorgan for the manipulation and bid rigging of municipal investment and related contracts, provided that JPMorgan satisfies its ongoing obligations under the agreement.
    In May 2011, UBS AG agreed to pay a total of $160 million in restitution, penalties and disgorgement to federal and state agencies for its participation in anticompetitive conduct in the municipal bond derivatives market.
    The department’s ongoing investigation into the municipal bonds industry is being conducted by the Antitrust Division, the FBI and the IRS-Criminal Investigation. The department is coordinating its investigation with the SEC, the OCC and the Federal Reserve Bank of New York. The department thanks the SEC, IRS, OCC, Fed and state attorneys general for their cooperation and assistance in this matter.
   Souce: U.S. Department of Justice release.

EPA Proposes New Rules On Hazardous Waste

   WASHINGTON – 7/7/2011 - The U.S. Environmental Protection Agency (EPA) is proposing new safeguards for recycling hazardous materials to protect public health and the environment. Today’s proposal modifies EPA’s 2008 Definition of Solid Waste (DSW) rule, which revised hazardous waste regulations to encourage recycling of hazardous materials. Today’s proposal will improve accountability and oversight of hazardous materials recycling, while allowing for important flexibilities that will promote its economic and environmental benefits. The EPA is opening up this proposal for public comment.
    The EPA is also releasing for public comment its draft expanded environmental justice analysis of the 2008 DSW final rule, which evaluates the rule’s potential impact on low-income and minority communities. EPA is also requesting public comment on the environmental justice analysis as well as on suggested changes received from peer review. The analysis and peer review comments will be available in the docket for this rule making once the proposal is published.
   “Safe recycling of hazardous materials conserves vital resources while protecting the environmental and economic health of our communities,” said Mathy Stanislaus, assistant administrator for EPA’s Office of Solid Waste and Emergency Response. “Today’s proposed enhancements show EPA’s commitment to achieving sustainable materials management through increased recycling, while retaining safeguards to protect vulnerable communities and the environment.”
    The EPA’s re-examination of the 2008 DSW final rule identified areas in the regulations that could be improved to better protect public health and the environment with a particular focus on adjacent communities by ensuring better management of hazardous waste. Today’s proposal includes provisions to address those areas through increased transparency and oversight and accountability for hazardous materials recycling. Facilities that recycle on site or within the same company under the reduced regulatory requirements retained under the proposal would be subject to enhanced storage and record keeping requirements as compared to the 2008 rule.
   Companies that send their hazardous materials off site for recycling would have tailored storage standards, while being required to send their materials to a permitted hazardous waste recycling facility. The proposed rule also creates a level playing field by requiring all forms of hazardous waste recycling to meet requirements designed to ensure materials are legitimately recycled and not being disposed of illegally.
    EPA will accept comment on this proposal for 60 days after publication in the Federal Register. The docket for the rule making is EPA-HQ-RCRA-2010-0742 and can be accessed at http://www.regulations.gov once the proposal is published.
    More information about this rule making: http://www.epa.gov/waste/hazard/dsw/rulemaking.htm

New Illinois Laws Target Death Penalty, Antifreeze

    By Benjamin Yount (Illinois Statehouse News) - 7/5/2011 - Illinois newest laws cover the spectrum from death to taxes to antifreeze.
   Illinois became the 16th state to abolish the death penalty, beginning July 2.
   Jeremy Schroeder, executive director of the Illinois Coalition to Abolish the Death Penalty, a grassroots organization that pushed for the abolition of the state's death penalty since 1976, said Illinois Governor Pat Quinn, who signed the bill into law in March, ordered life sentences for anyone on death row, including defendants in a handful of death penalty cases statewide.
    "It's certainly kind of a sad waste of taxpayer money, knowing that those people aren't going to be placed on death row," added Schroeder.
    However, the law’s effective date likely will go unnoticed, said Schroeder.
    "Most Illinoisans didn't think we had the death penalty," said Schroeder. Illinois has not executed a prisoner in more than 10 years.
    Online shoppers will pay the state's sales tax when they buy from online stores that do not have a physical store in Illinois. Rates start at 6.25 percent, but vary depending on local communities.
    Illinois' so-called Amazon Tax, which takes effect Friday, drove online retailer Fat Wallet out of the state.   
    The web-based coupon and deals site moved its 56 employees from outside of Rockford to Beloit, Wis.
    "We said all along (the tax) was going to affect a pretty good chunk of our bottom line, and we'd have to relocate if it was passed," said Fat Wallet spokesman Brent Shelton. "So we did."
    Shelton said he wants the state-by-state spat over online sales taxes to end and be replaced with a national online tax to level the playing field.
    But it's not all weighty issues that prompted new laws. Friday also brings a new requirement for bitter-tasting antifreeze. The law is a result of pet owners, and the deadly consequences of "sweet" antifreeze.
    "Antifreeze, people tell me, I've never really tasted it, has a very sweet flavor about it. Some dogs and cats like the taste of it," said Dr. Byron McCall a Springfield-area veterinarian. "If the car leaks a little antifreeze in the garage, the dogs and cats lick it up."
    McCall said antifreeze is toxic and causes fatal kidney failure in pets. Illinois joins a dozen other states in requiring that a bitter-tasting ingredient be added to antifreeze.
    Other new laws target drivers who refuse to take a breathalyzer test after causing a wreck while driving under the influence of alcohol; criminals who harm children and pension eligibility for Chicago teachers.
   Story courtesy of Illinois Statehouse News.

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