Ocean Bank Agrees to Pay $10.9 Million Penalty

   WASHINGTON, DC - 8/29/2011 - The Federal Deposit Insurance Corporation (FDIC), the Treasury's Financial Crimes Enforcement Network (FinCEN), and the State of Florida Office of Financial Regulation (OFR) announced on Aug. 11 the assessment of concurrent civil money penalties of $10.9 million against Ocean Bank, Miami, Fla., for violations of federal and state Bank Secrecy Act (BSA) and anti-money (AML) laundering laws and regulations.
   Ocean Bank, without admitting or denying the allegations, consented to payment of the civil money penalties, which was satisfied by a single payment to the U.S. Government.
   "Effective Bank Secrecy Act/anti-money laundering programs commensurate with the risk profile of the institution is paramount in protecting our financial system and individual banks from harm," said Sandra L. Thompson, Director, Division of Risk Management Supervision. "This penalty underscores the significance for banks to have strong internal systems and controls to detect and report suspicious activity and ensure compliance with Bank Secrecy Act requirements."
    In taking these actions, the FDIC, FinCEN, and OFR determined that the bank failed to implement an effective BSA/AML Compliance Program with internal controls reasonably designed to detect and report money laundering and other suspicious activity in a timely manner. The bank failed to conduct adequate independent testing, particularly with respect to suspicious activity reporting requirements. In addition, the bank failed to sufficiently staff the BSA compliance function with appropriately trained staff to ensure compliance with BSA requirements.
   "The Bank failed to recognize and mitigate risks and report transaction activity often associated with money laundering involving direct foreign account relationships in high-risk jurisdictions, particularly Venezuela," noted FinCEN Director James H. Freis, Jr. "The Bank's failure to respond to such risk with commensurate systems and controls was both systemic and longstanding."
    Florida Office of Financial Regulation Commissioner Tom Cardwell said the OFR will continue to monitor Ocean Bank's efforts to enhance its BSA/AML program.
     "We are confident the bank is committed to be in full compliance with the letter and spirit of the Consent Order and Agreement," Cardwell said.
   Source: Financial Crimes Enforcement Network.

Single DNA Mutation Linked to Proteus Syndrome

Finding Holds Promise in Cancer Fight
                   By Steve Rensberry
   (RPC) - 8/25/2011 - The National Institutes of Health issued a report this month announcing that scientists had pinpointed the mutation they believe is responsible for the very unusual Proteus Syndrome, a finding which they suggested may hold promise in understanding and treating cancer. For more information about Proteus Syndrome, see: FAQ.
   Details of the study were first published this month in the New England Journal of Medicine here: A Mosaic Activating Mutation in AKT1 Associated with the Proteus Syndrome.
   Proteus Syndrome is an extremely rare condition involving the uncontrolled, typically asymmetric overgrowth of various body tissues, bones and other parts. Identification involves noting the unequal distribution of affected areas, the appearance of the suspected syndrome among only one member in a family, and continued growth over time of the body areas experiencing accelerated growth.
   "Proteus syndrome does not run in families, but faulty genes were believed to be responsible. Some experts proposed that the condition might be a genetic mosaicism. Mosaic disorders arise when a genetic mutation occurs spontaneously during embryonic development," the NIH report states.
   A research team at the NIH’s National Human Genome Research Institute (NHGRI) used a technique called whole-exome sequencing to examine the cells of six affected individuals in order to determine if their hypothesis was correct. What they discovered was a gene that had already been implicated in cancer studies and related therapies.
   "The analysis reveled a single-letter misspelling in the genome of affected cells," The NIA states. "The mutated gene, called AKT1, is a known ocogene—a gene that can promote the uncontrolled cell growth associated with cancer."
   Further confirmation of the role played by a gene defect was found by testing 29 others, for who 26 showed the variation. No variations have been found beyond affected individuals.
   Accelerated AKT protein activity had been observed in previous research into the cause of the syndrome.
   The focus now is on developing a drug to inhibit the increase in AKT protein activity.
   For further reading, see: Gene Variant in Proteus Syndrome Identified.

Debate Will Focus on Corporate Reponsibility

   NEW YORK- (BUSINESS WIRE) - 8/23/2011 - Is sustainability sustainable for the bottom line? If corporate responsibility programs erode or reduce returns, why do companies pursue them? On the other hand, if they are profitable, why do executives and CFOs steer away from these valuable strategies? Four leaders in investment management and academic analysis will debate these questions in an Oxford-style debate on whether shareholder value is eroded or enhanced when companies integrate sustainability strategies and pursue corporate responsibility initiatives. In this unique format, two teams will debate, and seek to sway the audience with their compelling positions, arguments and rebuttals.
    In partnership with the New York Stock Exchange (NYSE), Corporate Responsibility magazine’s COMMIT!Forum will assemble an unprecedented summit of professionals working to improve corporate responsibility and sustainability. The event will be held Sept. 26-27 at the Javits Center in Manhattan, a global investment hub.
    The team arguing that “shareholder value is eroded by sustainability and corporate responsibility” is Gerry Sullivan, Portfolio Manager of the VICE Fund (ticker: VICEX – www.usamutuals.com) and Dr. Aneel Karnani, PhD, from the University of Michigan and author of "The Case Against Corporate Social Responsibility,” published in The Wall Street Journal.
    “In general, the capital markets reward companies that exceed expectations and shareholders benefit from that success. I have only seen anecdotal evidence that sustainability enhances shareholder value. Of 11 selected ‘Green Funds’ only 2 have one-year performance better than the S&P 500. It will be difficult to show that sustainability has sufficient evidence compared to the everyday markets that are hyper-efficient and serve the best interest of investors,” said Sullivan, developer of the NASDAQ OMX Industry Leaders Index.
   A former Salomon Bros. corporate finance analyst and O'Connor & Associates options trader, Sullivan holds an MBA from the University of Chicago and an undergraduate degree from Columbia University.
    “As society faces many large challenges such as climate change, environmental degradation, pervasive poverty, and disease epidemics, a critical issue is determining the appropriate roles for business and government in addressing these problems. This debate will explore the arguments about the role of business in society,” said Karnani, associate professor of strategy at the University of Michigan; and the author of Fighting Poverty Together. Karnani holds a doctorate from Harvard Business School as well as an MBA from the Indian Institute of Management and a B.A. from the Indian Institute of Technology.
    The team advocating that “shareholder value is enhanced by sustainability and corporate responsibility” includes R. Paul Herman, Chief Executive and Chief Investment Officer of HIP Investor Inc. (www.HIPinvestor.com), and Dr. Vinay Nair, chief investment officer of Ada Investments (www.adainvestments.com) and Associate Professor at the Columbia Business School.
    “We will show that investors have the potential to enhance their upside and limit their downside when investing for positive change,” said Nair, CEO and CIO of the New York based Ada Investment Management LP and adjunct associate professor at the Columbia Business School. The co-author of Investing for Change and a Senior Fellow at The Wharton School, Nair holds a doctorate from NYU’s Stern School and a B.Tech from the Indian Institute of Technology in Madras.
    “This spirited, but civil, debate will put front-and-center the real value of business to society and the potential for more profitable and lower-risk investor portfolios from the implementation of sustainability,” said Herman. The author of The HIP Investor: Make Bigger Profits by Building a Better World and a lecturer at The Presidio Graduate School (MBA) and Thammasat Business School (Thailand), he holds a B.Sci in Economics from Wharton.
    The debate will take place on September 26th as part of the COMMIT!Forum (www.commitforum.com) in New York City and is open to the public. The debaters will present their cases for and against the resolution, “RESOLVED that when companies expend resources on corporate responsibility and sustainability they destroy economic value.”
    About CR Magazine’s COMMIT!Forum:
    The COMMIT!Forum is named for its focus on innovators, leaders and companies making real commitments to improving society through business and investing. Staged by Corporate Responsibility magazine, publisher of the renowned “100 Best Corporate Citizens List,” in partnership with NYSE Euronext, this Forum provides a venue for debate, inspiration, and engagement. The Forum takes place September 26-27, 2011 at the Javits Center in New York City. Register today at http://www.commitforum.com.
    Support for the COMMIT!Forum has been received from Platinum Sponsor HP as well as ABBOTT, AHA!, The Clorox Company, ConAgra Foods, Future 500, Green Mountain Coffee Roasters, MolsonCoors, REC Solar, SAP, and State Street Corporation. Program partners include NYSE Euronext as well as American Society for Quality, Chicago Clean Energy Alliance, Corporate Voices for Working Families, Environmental Defense Fund, Global Environmental Management Initiative, Global Reporting Initiative, The Humane Society, National Democratic Institute, and U.S. Green Building Council’s Center for Green Schools.

Compound Improves Lifespan of Obese Mice

   (NIH) - 8/20/2011 - Researchers have reported that obese male mice treated with a synthetic compound called SRT1720 were healthier and lived longer compared to non-treated obese mice. The experimental compound was found to improve the function of the liver, pancreas and heart in mice.
   The National Institute on Aging (NIA) supported the study, in collaboration with Sirtris, a GlaxoSmithKline company. The study was primarily conducted by the NIA, part of the National Institutes of Health, and is published online in the Thursday, August 18, 2011, issue of Scientific Reports.
   "This study has interesting implications for research on the biology of aging. It demonstrates that years of healthy life can be extended in an animal model of diet-induced obesity by a synthetic compound that modulates a gene pathway associated with aging," said NIA Director Richard J. Hodes, M.D. More research is needed to assess the relevance of these findings in people, Hodes and the researchers noted.
  SRT1720, a patented molecule, has been shown to activate the SIRT1enzyme, part of a class of enzymes called sirtuins. Sirtuins have been previously implicated in aging processes and are thought to contribute to the positive effects of dietary restriction (also known as calorie restriction) in higher organisms, including nonhuman primates.
   In this study, scientists compared the health of 1-year-old, or middle-aged, male mice fed a high-fat diet with a high dose of SRT1720, a low dose of SRT1720 or no SRT1720. Additionally, these mice were compared to a control group of 1-year-old male mice fed a standard diet.
   "As we hypothesized, SRT1720 mimics dietary restriction, moderating many of the harmful effects of the high-fat diet and obesity. Furthermore, we found that the higher dose of the compound had a stronger effect and there were no signs of toxicity from SRT1720 even after 80 weeks of treatment," said study leader and senior author Rafael de Cabo, Ph.D., of the Laboratory of Experimental Gerontology at the NIA.
   Scientists reported changes caused by SRT1720 in the following areas:
  •    Lifespan. While all mice on the high-fat diet gained weight, mice treated with SRT1720 had an increased average and maximum lifespan compared to mice on the high-fat diet without SRT1720. From birth, the mice on the higher dose lived an average of 18 percent longer, and the mice on the lower dose lived an average of 4 percent longer than the mice on the high-fat diet without SRT1720. From 56 weeks of age, mean lifespan in low-dose mice increased by 11 percent and in high-dose mice by 44 percent.
  •    Liver. Mice treated with SRT1720 had less fat accumulation on their livers compared to non-treated, high-fat-diet mice. Scientists also tested liver function using two measurements. In both tests, mice treated with SRT1720 demonstrated better liver function than non-treated mice on a high-fat diet, but only one test showed the liver of treated mice to have equal function as mice on standard diet. Livers of treated mice were smaller than those from untreated mice on a high-fat diet, although they were still larger than livers of mice on a standard diet. In addition, SRT1720 suppressed liver inflammation and protected mice against cell death in the liver.
  •    Pancreas. SRT1720 protected high-fat-diet mice from resistance to insulin, which is often associated with obesity and can precede diabetes. Glucose (blood sugar) measurements were approximately equal for all groups of mice, including mice on a standard diet. Insulin levels were approximately double in mice on the high-fat diet without SRT1720 compared to mice on the standard diet and on a high-fat diet with SRT1720.
  •    Heart. High-density lipoprotein (HDL), associated with good cardiovascular health, was highest in mice on a high-fat diet with a high dose of SRT1720, even compared to mice on a standard diet. SRT1720 protected mice against cell death in the heart and suppressed inflammation. All groups of mice on a high-fat diet experienced the same increase in cholesterol, compared to mice on a standard diet.
  •    Exercise and oxygen metabolism. Mice on a high-fat diet had higher levels of oxygen consumption during periods typically characterized by less activity. SRT1720 reversed this trend; treated mice had lower resting levels of oxygen. High-fat-diet mice with no or a low dose of SRT1720 were less active than mice on a high dose of SRT1720 or on a standard diet.
  •    Genes. SRT1720 suppresses genes typically expressed in mice on a high-fat diet. For example, SRT1720 suppressed genes that are associated with aging in the liver and previously identified as associated with aging in the kidney and brain.
   To verify that the positive health effects caused by SRT1720 were, at least in part, dependent on the Sirt1 pathway, scientists conducted a series of experiments using cell cultures. The researchers also assessed changes to mitochondrial respiration in adult Sirt1-specific knockout mice. The tests showed that SRT1720 did not have an effect in mice or cultures lacking the Sirt1 gene although it did have an effect in mice and cultures with Sirt1.
   While the findings are promising, scientists emphasize the limitations of their research.
   "In mice, SRT1720 reversed many of the health problems associated with a high-fat diet and did not have toxic side effects, but it is too early to know whether these findings could be replicated in other animal models, much less humans," said de Cabo. "The bottom line is that we need much more research before considering     
   SRT1720 or related compounds as a possible treatment for diseases of aging."
   The study was a collaborative effort between the laboratories of de Cabo; James L. Ellis of Sirtris, and David A. Sinclair, Ph.D., co-director of the Glenn Laboratories for Molecular Biology of Aging at Harvard Medical School, Boston and consultant to Sirtris. Researchers from the following institutions also collaborated in the study: University of Pennsylvania School of Medicine, Philadelphia; University of Oklahoma Health Sciences Center, Oklahoma City; Ècole Polytechnique Fédérale de Lausanne, Lausanne, Switzerland; University of Michigan, Ann Arbor; and University of Kentucky, Lexington.
   This research was performed under a Cooperative Research and Development Agreement between the NIA and Sirtris, a GSK company.
   Source: National Institutes of Health

Higher Home Prices Reduce Housing Affordability

   LOS ANGELES - (BUSINESS WIRE) - 8/11/2011 - Housing affordability fell throughout most areas of the state in the second quarter of 2011, primarily due to a seasonal increase in home prices, the California Association of Realtors (C.A.R.) reported today.
   The percentage of buyers who could afford to purchase a median-priced, single-family home in California declined to 51 percent in the second quarter of 2011, down from 53 percent in first-quarter 2011 but was up from 46 percent in the second quarter of 2010, according to C.A.R.’s Traditional Housing Affordability Index (HAI).
    C.A.R.’s HAI measures the percentage of all households that can afford to purchase a median-priced, single-family home in California. C.A.R. also reports affordability indices for regions and select counties within the state. The Index is considered the most fundamental measure of housing well-being for home buyers in the state.
    “The pending cut in the Fannie Mae/Freddie Mac high cost loan limits will make it harder and more expensive for those who live in high cost areas to purchase a home,” said C.A.R. President Beth L. Peerce. “Buyers who plan to finance their home purchase with a mortgage of $625,500 or more will face higher interest rates, higher down payments, and tighter loan qualification requirements beginning Oct. 1. Those in a position to buy should act before the loan limits are reduced,” Peerce noted.
    Mortgage rates in the second quarter of 2011 were essentially unchanged from the first quarter of 2011, but were down from second-quarter 2010.
   Buyers needed to earn a minimum annual income of $63,080 to qualify for the purchase of a $293,580 statewide median-priced home in the second quarter of 2011. The monthly payment, including taxes and insurance, would be $1,580, assuming a 20 percent down payment and an effective composite interest rate of 4.85 percent.
    Regionally, housing affordability fell in the higher-priced areas of the state, such as the San Francisco Bay Area and Central Coast, but edged up in lower-priced areas, such as the Central Valley. At 77 percent, San Bernardino County was the most affordable, while San Mateo County was the least affordable, with only 21 percent of households able to afford the county’s median-priced home.
    Visit http://www.car.org/marketdata/data/haitraditional/ to see C.A.R.’s historical housing affordability data. For first-time buyer housing affordability data, visit http://www.car.org/marketdata/data/ftbhai/.

Man Sentenced, Fined For Smuggling Refrigerant

   WASHINGTON  – 8/6/2011 - On July 29, U.S. District Court Judge Adalberto Jordan sentenced Brendan Clery, 34, to 18 months in prison and ordered him to pay a $40,000 criminal fine and forfeit illegal proceeds in the amount of $935,240. Clery pleaded guilty in April 2011 to knowingly importing approximately 278,256 kilograms of illegal hydrochlorofluorocarbon - 22 (HCFC-22, also known as R-22) into the United States.
   According to the EPA, HCFC-22 is an ozone-depleting substance regulated by EPA under the Clean Air Act (CAA). HCFC-22 depletes the ozone layer, resulting in increased ultraviolet radiation-B (UV-B) reaching the Earth’s surface, which in turn leads to a greater chance of overexposure to UV radiation and the risks of health effects, such as skin cancer, cataracts, and suppression of the immune system.
    Court records and statements made in 2005 show that Clery formed and served as president of Lateral Investments LLC, a corporation he established in Florida for the purpose of importing merchandise, including refrigerant gas he intended to sell illegally. Between June and August 2007, Clery illegally smuggled approximately 278,256 kilograms or 20,460 cylinders of restricted HCFC-­22 from China, with a market value of $1,438,270, and at no time did Clery or Lateral Investments hold the consumption allowances required to legally import HCFC-22.
   EPA established a schedule to phase out the production and importation of ozone-depleting substances, with a complete phase out starting in 2030. To meet its obligations under the Montreal Protocol, an international treaty designed to protect the ozone layer, EPA issued baseline consumption allowances for the production and importation of HCFC-22 to individuals and companies. To legally import HCFC-22 for consumption, one must hold and expend one consumption allowance for each kilogram of HCFC-22 imported into the United States.
    This case was part of a larger criminal investigation known as Operation Catch-22. It was investigated by the Environmental Protection Agency, U.S. Immigration and Customs Enforcement, and the Florida Department of Environmental Protection, Criminal Investigation Bureau, and prosecuted by special assistant U. S. Attorney Jodi A. Mazer.
    "EPA takes seriously the smuggling of illegal substances that can harm the ozone layer, which protects us from harmful UVB radiation that can cause skin cancer and cataracts,” said Cynthia Giles, assistant administrator for EPA’s Office of Enforcement and Compliance Assurance. “Today’s sentencing is an example of EPA’s commitment to aggressively enforce U.S. laws and meet our international obligations."
   Source: U.S. EPA

Twenty Seven Charged in Mortgage Schemes

   MIAMI – 8/4/2011 - Twenty-seven south Florida residents were indicted Aug. 2 on charges stemming from their participation in a series of mortgage fraud schemes that resulted in more than $30 million in fraudulent loans.
   The indictments were announced by Wifredo A. Ferrer, U.S. Attorney for the Southern District of Florida; John V. Gillies, Special Agent in Charge FBI, Miami Field Office; Michael K. Fithen, Special Agent in Charge, U.S. Secret Service (USSS); Hugo J. Barrera, Special Agent in Charge, Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF); and James K. Loftus, Director, Miami-Dade Police Department (MDPD), along with members of the Federal-State Mortgage Fraud Strike Force.
   Indictments were as follows:
United States v. Luis A. Oramas, et al.
   On Aug. 2, 2011, 17 defendants were charged in a 40-count indictment for their alleged participation in a scheme that resulted in approximately $20 million in fraudulent mortgage loans.
   Charged in the indictment were defendants Luis A. Oramas, 43, of Miami; Keskea Hernandez-Frei, 40, of Miramar. Fla.; Mariela Hernandez, 46, of Miami; Elayne Gutierrez, 32, of Miami; Ana Taveras, 33, of North Miami Beach, Fla.; Joaquin Gomez, 45, of Hialeah, Fla.; Manuel Valdes, 49, of Miami; Yudith Padilla, 38, of Hialeah; Ivan Padilla, 46, of Hialeah; Martha Fernandez, 43, of Hialeah; Maribel Diarth, 50, of Miami; Carlos Sanchez, 40, of Miami Lakes, Fla.; Ivett Lorenzo, 42, of Miami; Guillermo Rivero, 42, of Miami; Napoleon Cadalzo, 41, of Hialeah; Hisamara Esponda, 30, of Hialeah Gardens, Fla.; and Rafael Bonne, 61, of Miami.
   According to the indictment, from 2006 through 2008, Luis A. Oramas, Keskea Hernandez-Frei, Mariela Hernandez, Elayne Gutierrez, Ana Taveras Joaquin Gomez and Manuel Valdes identified residential properties in Miami-Dade County that were for sale and then recruited and paid individuals to act as straw buyers of the properties. Thereafter, defendant Hernandez-Frei used her companies, Kasa Mortgage, a mortgage brokerage firm, and New Line Realty, a real estate company, to conduct most of the transactions.
   The indictment alleges that Mariela Hernandez worked at Kasa as a loan processor, and Ana Taveras worked as a realtor for New Line. Through Kasa and New Line, Hernandez-Frei, Mariela Hernandez and Taveras, prepared fraudulent sales contracts and mortgage and home equity line-of-credit loan applications on behalf of complicit straw borrowers. The documents contained false information, including inflated sales prices, false employment verifications and pay stubs, false statements about income and funds on deposit and bogus cash-to-close checks. Yudith Padilla, Ivan Padilla, Martha Fernandez, Maribel Diarth, Carlos Sanchez, Ivett Lorenzo, Guillermo Rivero, Napoleon Cadalzo, Hisamara Esponda and Rafael Bonne, all acted as straw borrowers. In some instances, Mariela Hernandez, Taveras and Valdes also acted as straw borrowers.
   According to the indictment, the defendants used various methods to execute their scheme. In one method, commonly referred to as a “double-HUD” scheme, the defendants created and submitted to the lending institutions false duplicate Department of Housing and Urban Development (HUD) settlement statements, which grossly inflated the true purchase price of the properties. At other times, the defendants obtained multiple fraudulent mortgage loans from different lenders for the same piece of property.
   Once the mortgage applications were approved, the lenders wired the loan proceeds to title agents, such as Elayne Gutierrez, for closing. At closing, Gutierrez often sent the difference between the inflated mortgage loan proceeds and the actual selling price directly to Oramas, who then disbursed kickback payments to straw borrowers and other participants in the scheme.
   To perpetuate the scheme and avoid detection, the defendants failed to record or falsely recorded mortgage deeds and other mortgage documents with the state of Florida. In a further attempt to perpetuate the fraud, the defendants would make payments on the loans until the properties could be resold, often to another straw borrower, repeating the cycle of fraud. Eventually, the defendants stopped making payment on the loans and the properties went into foreclosure, often resulting in substantial losses to the lending institutions.
   The indictment charges the defendants with conspiracy to commit mail and wire fraud, and substantive mail fraud and wire fraud. If convicted, the defendants face a statutory maximum term of 20 years in prison on the conspiracy to commit mail and wire fraud and substantive mail fraud charges and 20 years in prison on the wire fraud charges.
   U.S. Attorney Ferrer commended the investigative efforts of the Federal-State Mortgage Fraud Strike Force, with special commendation to the U.S. Secret Service and the Miami-Dade Police Department. The case is being prosecuted by Assistant U.S. Attorney Sean T. McLaughlin.
United States v. Ghaith Al Nahar, et. al.
   On July 28, 2011, six defendants were charged in a six-count indictment for their participation in a nine-month mortgage fraud scheme that resulted in approximately $9.2 million in fraudulent loans. Charged in the indictment were Ghaith Al Nahar, 40, formerly of Boynton Beach, Fla.; Michelle Austin Wilks, 38, of Parkland, Fla.; Romy Defay, 28, of West Palm Beach, Fla.; Lucien Laguerre, 37, of Lauderhill, Fla.; Jeffery Gilbert, 53, of Miramar; and Philip Jay Newman, 58, of Miami.
   According to the indictment, from February to November 2007, Ghaith Al Nahar operated Best Decisions Home Mortgage Inc., located in Lake Worth, Fla. Al Nahar and Romy Defay identified residential properties in Palm Beach County that were for sale and then allegedly recruited and paid individuals to act as straw buyers of the properties. The straw buyers included Lucien Laguerre, Jeffery Gilbert and Philip Jay Newman.
   To execute the scheme, Al Nahar and Defay submitted loan applications and supporting documents containing false information to various mortgage lenders across the United States. Based on these false statements and documents, the mortgage lenders issued more than $9 million in loans.
After the lenders approved the fraudulent loans, Michelle Austin-Wilks, a title agent, prepared false HUD-1 Settlement Statements which, among other things, falsely represented to the lenders that the straw buyers were bringing their own money to closing. Austin-Wilks also falsely represented to the lenders that she had disbursed the loan proceeds in accordance with the lenders’ instructions. Instead, Austin-Wilks made unauthorized disbursements from the loan proceeds to one of her companies as “processing fees.”
   The indictment charges the defendants with conspiracy to commit wire fraud, and substantive wire fraud. If convicted, the defendants face a maximum statutory sentence of 20 years in prison on each count.
   U.S. Attorney Ferrer commended the investigative efforts of the Federal-State Mortgage Fraud Strike Force, with special commendation to the FBI. The case is being prosecuted by Assistant U.S. Attorney Armando Rosquete.
United States v. Gerardo Wilhelm, Juan J. Flores, and Alejandro Figueredo
   On July 26, 2011, three defendants were charged in an eight-count indictment for their participation in an arson, mortgage fraud and insurance fraud scheme that resulted in losses of more than $500,000. Charged in the indictment were Gerardo Wilhelm, 38, of Miami; Juan J. Flores, 39, of Ocala, Fla.; and Alejandro Figueredo, 30, of Miami.
   According to the indictment, Wilhelm, a real estate agent; Flores, a mortgage broker; and Figueredo, an insurance adjuster, engaged in a string of federal crimes involving a townhouse located in Miami-Dade County. In early 2006, Wilhelm obtained mortgage loans to purchase the property by misrepresenting his and his wife’s employment and falsely stating that they intended use of the property as their primary residence.
   Wilhelm then rented the townhouse until it no longer generated income. In late 2007, after foreclosure proceedings were initiated against him, Wilhelm hired Flores and Figueredo to burn down the townhouse. After the fire, defendant Wilhelm submitted a fraudulent insurance claim for the fire damage, and received approximately $180,000 in insurance proceeds, made payable to the lender. However, Wilhelm forged the endorsement on the insurance check and kept the money.
   After misappropriating the insurance money, Wilhelm allegedly obtained a loan modification, in the form of a short sale, from the defrauded lender that held the mortgage loans on the townhouse. In carrying out this short sale, Wilhelm hired a straw buyer to purchase the property. After the sale was completed, the straw buyer transferred the townhouse title to a company Wilhelm controlled. Thereafter, Wilhelm and his accomplices sold the townhouse for $240,000, resulting in a $500,000 loss to the financial institutions.
   The defendants were charged with conspiracy to commit arson and arson. Wilhelm was also charged with two counts of conspiracy to commit mail fraud, three counts of substantive mail fraud and one count of check fraud. If convicted, the defendants face a maximum statutory sentence of 20 years in prison on the conspiracy to commit mail fraud and substantive mail fraud charges and 20 years in prison on the conspiracy to commit arson and substantive arson charges.
   U.S. Attorney Ferrer commended the investigative efforts of the Federal State Mortgage Fraud Strike Force, with special commendation to ATF and Miami-Dade Police Department. The case is being prosecuted by Assistant U.S. Attorney Roger Cruz.
United States v. David A. Donet Sr.
   On Aug. 1, 2011, David A. Donet, Sr., 63, of Miami, was charged in a criminal information for his involvement in the misappropriation of mortgage loan proceeds and other client funds. According to the information, Donet, an attorney who handled real estate closings and other matters, caused various lenders and others to disburse loan proceeds and other funds into his attorney trust account. Instead of disbursing the funds appropriately, however, Donet improperly deposited the money into his law firm’s business account and then misappropriated the funds.
   The defendant was charged with eight substantive counts of mail and wire fraud. If convicted, Donet faces a maximum possible sentence of 20 years in prison on each count.
   U.S. Attorney Ferrer commended the investigative efforts of the Federal State Mortgage Fraud Strike Force, with special commendation to FBI. The case is being handled by Assistant U.S. Attorney Karen Rochlin.
   The cases announced today are also part of the Department of Justice’s Financial Fraud Enforcement Task Force. This national task force was established in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. Mortgage fraud is a key focus of the Financial Fraud Enforcement Task Force’s efforts. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes.
   Reminder: An indictment is only an accusation and a defendant is presumed innocent until proven guilty.
   Source: U.S. Department of Justice release.

Illinois 50 out of 50 in 2010 for level of state deficit

   By Andrew Thomason (Illinois Statehouse News) - 8/2/2011 -  Illinois ended fiscal 2010 as the most broke state in the nation.
    Illinois owed $37.9 billion more than all of its assets combined, including cash, investments and property, as of July 1, 2010, according to a recent statewide financial audit by the Illinois Auditor General William Holland and Illinois Comptroller Judy Baar Topinka.
    Illinois even shorted unknowing taxpayers of $1.4 billion. An examination of the Income Tax Refund Fund by auditors revealed a $1.4 billion deficit, because the state didn’t put enough income tax revenue into the fund, causing a delay in getting the taxes returned to individuals and businesses.
    The deficit would have been worse without a $3 billion cash infusion of federal stimulus money.
    Illinois was one of four states with a deficit when comparing all its debts to assets in fiscal 2010, and of those four, it was in a hole of about $10 billion more that its nearest cousin — New Jersey, which ranked second.
    A combination of mismanagement and a global recession are the largest factors in Illinois monetary woes.
    Former Gov. Rod Blagojevich, who was convicted on corruption charges in federal court recently, came into office in 2003 during a small recession. He immediately promised he wouldn’t raise taxes, but he and the legislature did not cut spending, resulting in a full-blown fiscal crisis.
    “We had a period, maybe three, four or five years, from 2004 to 2007, where we could have, not solved all our problems, but gotten things under control. But we wasted those years and got deeper and deeper in the hole just because of a lack of discipline,” Fred Giertz, an economist with the Institute of Government and Public Affairs at University of Illinois at Urbana-Champaign.
    Another reason for the state of Illinois' financial misery is how it keeps its books, according to the audit. Ralf Seiffe is the director of research at the Institute for Truth in Accounting, a nonprofit that works to make governments provide accurate financial reports, according to its website.  
    "Bad accounting policies and bad budgeting policies are the means and manner by which legislators and the governor get away with essentially spending more than they should," Seiffe said.
   The state was faced with a smaller, but similar problem in the early 1990s. Former Gov. Jim Edgar and the General Assembly were handed a $2 billion deficit and produced a $1.5 billion surplus by 1999 through a tax increase, budget austerity measures and some good fortune in the financial markets.
    “Edgar was either good or lucky, or both,” Giertz said, adding that a similar combination is needed to pull the state out of its $37.9 billion hole.
    Bringing the state’s finances in line will be a struggle. Illinois recently instituted what was billed as a temporary income tax increase on individuals and businesses.
    Money from the tax hike is paying off old bills and making sure new ones are paid on time. Politicians will be faced with a situation where letting the income tax hike expire is unpalatable, because that would require a corresponding $6.8 billion cut to the state’s budget to make up for the lost revenue.
    Most people agree that the state needs to reduce spending, said David Yepsen, director of the Paul Simon Public Policy Institute at Southern Illinois University. When presented with the programs that eat up the majority of the budget, however, people are hard pressed to point to areas where they would take the blade.
    “It’s no wonder that politicians have got us to this point, because they reflect what the sentiments are of a lot of people. A lot of people want something for nothing,” Yepsen said. “We want public services, yet we don’t want to pay the full price of them, and we don’t trust government to spend money wisely or to cut budgets fairly.”
    Massive public worker layoffs, school closures due to a lack of funds and the firing of entire fire departments statewide are examples of the kind of crisis needed to spur the public and government to take steps toward fixing the state’s finances, said Yepsen.
    A mini-crisis earlier this year is partially responsible for prodding the Legislature and Gov. Pat Quinn into action.
    The organizations that rate the state’s credit worthiness and its main source of borrowing — selling bonds — threatened to downgrade those bonds, when legislators floated a plan to leverage $3.7 billion to make the state’s payment to the pension system this spring. When a government’s bond rating falls, it’s harder to sell bonds, because investors don’t see them as good investments.
    Faced with that prospect, Quinn and the Legislature decided to make the state’s contribution with cash for first time in two years, instead of adding to the $13 billion the state owes in pension payment bonds.
    Additionally, since fiscal 2010, the state has taken the first steps of a long journey to get it on a more solid financial footing. Pension and workers’ compensation reforms, changes to Medicaid, a slimmer budget and an income tax increase were all passed this winter and spring.
    What’s needed to turn those baby steps into full strides?
    “It’s going to take Republicans talking about finding additional revenues. It’s going to take Democrats (finding) ways to talk about making cuts, and I think you’re seeing a form of that here with Quinn and the union. He’s clearly telling them something they don’t want to hear,” Yepsen said.
    Quinn has refused to pay state employees who are members of the American Federation of State, County and Municipal Employees Council 31 public worker union a 2-percent pay hike that is outlined in their contract.
    Quinn continues to say the Legislature didn’t include the money for the raises in the budget it sent him, and without the money, he can’t pay the extra $75 million. Two lawsuits, one in Illinois Circuit Court and one in the U.S. District Court in Springfield, are pending on this issue.
    While politicians seem to be moving in the right direction, Yepsen said he is concerned about the speed with which they are doing it.
    “I just worry that it’s not fast enough. And that what’s going to happen to Illinois is as this recession ends, other states are going to get out the problem quicker than we are. And those states are going to become more attractive to economic growth and development than we are, because we are going to be lagging behind in cleaning up this mess,” Yepsen said.
   If the state was in the red for $37.9 billion in 2010, then what does the fiscal picture look like now? The audit released Thursday answers that question by simply saying: It’s nearly impossible to tell.
   However, the state's mounting debts were contrasted against the state's assets in this audit.
A report by Treasurer Dan Rutherford released in May said the state owes $45 billion in debt through 2036, including interest. Taxpayers owe $140 billion in unfunded pension and retiree health care liabilities, according to the same report.
   Story published courtesy of Illinois Statehouse News. Originally published July 28, 2011.