Securities Broker Sentenced to 84 Months

   (DOJ) - 5/22/2013 - A former stock broker was sentenced to prison on May 16 for his role in an extensive pump-and-dump stock manipulation scheme.
   The announcement was made by Acting Assistant Attorney General Mythili Raman of the Justice Department’s Criminal Division , U.S. Attorney Danny C. Williams Sr. of the Northern District of Oklahoma, Special Agent in Charge James E. Finch of the FBI’s Oklahoma City Division and Internal Revenue Service-Criminal Investigation (IRS-CI) Chief Richard Weber.
  Joshua Wayne Lankford, 39, of Dallas, was sentenced by U.S. District Judge James H. Payne in the Northern District of Oklahoma to serve 84 months in prison. In addition to his prison term, Lankford was ordered to forfeit $250,000. Proceeds from forfeited assets will be used to bring partial restitution to victims.
  On Dec. 10, 2012, Lankford pleaded guilty to one count of money laundering.
   “Mr. Lankford and his co-conspirators took advantage of innocent investors to the tune of millions of dollars, pumping and dumping penny stocks without regard to anything but their wallets,” Raman said. “As this case shows, stockbrokers and other professionals will be punished if they break the law. Lankford now faces substantial time in prison for his manipulation scheme.”
   According to court documents and evidence presented at the 2010 trial, Lankford and his co-defendants manipulated the stocks of three companies: Deep Rock Oil & Gas Inc. and Global Beverage Solutions Inc., formerly known as Pacific Peak Investments, both of Tulsa, Okla., and National Storm Management Group Inc. of Glen Ellyn, Ill. The defendants devised and engaged in a scheme to defraud investors known as a “pump and dump,” in which they manipulated publicly traded penny stocks. A penny stock is a common stock that trades for less than $5 per share in the over the counter market, rather than on national exchanges. Lankford and his co-defendants executed the scheme by obtaining a majority of the free-trading shares of stock of the company they intended to manipulate, using fraudulent and deceptive means to acquire the stock and/or remove the trading restrictions on the shares they obtained.
   According to court records, Lankford and other conspirators “parked” their shares with various nominees, such as friends, relatives or other entities that they owned and controlled. Subsequently, they engaged in coordinated trading in order to create the appearance of an emerging market for these stocks, after which they conducted massive promotional campaigns in which unsolicited fax and email “blasts” were sent to millions of recipients. According to evidence presented at the 2010 trial, these blasts touted the respective stocks without accurately disclosing who was paying for the promotions, omitted that the defendants intended to sell their shares, and induced unsuspecting legitimate investors to purchase stock in the companies. The defendants and their nominees obtained significant profits by selling large amounts of shares after they had artificially inflated the stock price. For each of the three manipulated stocks, the conspirators’ sell-off caused declines of the stock price and left legitimate investors holding stock of significantly reduced value.
   According to Lankford’s guilty plea, he laundered $250,000 in proceeds derived from the stock manipulation scheme.
   Evidence presented in the 2010 trial showed that the overall scheme resulted in illegal proceeds of more than $43 million from more than 17,000 investor victims.
   Lankford was originally charged in a 24-count indictment unsealed on Feb. 10, 2009, against five defendants. Prior to trial, Lankford fled to Costa Rica, where he remained until he was extradited to the United States in May 2012. James Reskin, 54, of Louisville, Ky., was sentenced today to serve five years of probation for his role in the scheme. Co-defendants George David Gordon and Richard Clark, were convicted by a federal jury in May 2010 for their roles in the scheme. Gordon was sentenced to serve 188 months in prison, and Clark was sentenced to serve 151 months in prison. The fifth defendant, Dean Sheptycki, remains a fugitive.
   The case is being prosecuted by trial attorneys Andrew Warren and Kevin Muhlendorf of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Catherine Depew for the Northern District of Oklahoma. The case is being investigated by IRS-CI and the FBI.

Flu in Pregnancy Linked to Child's Bipolar Risk

   (NIH) - 5/14/2013 - Pregnant mothers’ exposure to the flu was associated with a nearly fourfold increased risk that their child would develop bipolar disorder in adulthood, in a study funded by the National Institutes of Health. The findings add to mounting evidence of possible shared underlying causes and illness processes with schizophrenia, which some studies have also linked to prenatal exposure to influenza.
   “Prospective mothers should take common sense preventive measures, such as getting flu shots prior to and in the early stages of pregnancy and avoiding contact with people who are symptomatic,” said Alan Brown, M.D., M.P.H, of Columbia University and New York State Psychiatric Institute, a grantee of the NIH’s National Institute of Mental Health (NIMH). “In spite of public health recommendations, only a relatively small fraction of such women get immunized. The weight of evidence now suggests that benefits of the vaccine likely outweigh any possible risk to the mother or newborn.”
   Brown and colleagues reported their findings online on May 8, 2013 in JAMA Psychiatry.
   Although there have been hints of a maternal influenza/bipolar disorder connection, the new study is the first to prospectively follow families in the same HMO, using physician-based diagnoses and structured standardized psychiatric measures. Access to unique Kaiser-Permanente, county and Child Health and Development Study databases made it possible to include more cases with detailed maternal flu exposure information than in previous studies.
   Among nearly a third of all children born in a northern California county during 1959-1966, researchers followed 92 who developed bipolar disorder, comparing rates of maternal flu diagnoses during pregnancy with 722 matched controls.
   The nearly fourfold increased risk implicated influenza infection at any time during pregnancy, but there was evidence suggesting slightly higher risk if the flu occurred during the second or third trimesters. Moreover, the researchers linked flu exposure to a nearly sixfold increase in a subtype of bipolar disorder with psychotic features.
   A previous study, by Brown and colleagues, in a related northern California sample, found a threefold increased risk for schizophrenia associated with maternal influenza during the first half of pregnancy. Autism has similarly been linked to first trimester maternal viral infections and to possibly related increases in inflammatory molecules.
   “Future research might investigate whether this same environmental risk factor might give rise to different disorders, depending on how the timing of the prenatal insult affects the developing fetal brain,” suggested Brown.
   Bipolar disorder shares with schizophrenia a number of other suspected causes and illness features, the researchers note. For example, both share onset of symptoms in early adulthood, susceptibility genes, run in the same families, affect nearly one percent of the population, show psychotic behaviors and respond to antipsychotic medications.
   Increasing evidence of such overlap between traditional diagnostic categories has led to the NIMH Research Domain Criteria (RDoC) project, which is laying the foundation for a new mental disorders classification system based on brain circuits and dimensional mechanisms that cut across traditional diagnostic categories.
   The research was also funded by NIH’s Eunice Kennedy Shriver National Institute of Child Health and Human Development (NICHD).
   The mission of the NIMH is to transform the understanding and treatment of mental illnesses through basic and clinical research, paving the way for prevention, recovery and cure. For more information, visit http://www.nimh.nih.gov.

Illegal Scheme Targeted Debt-ridden Customers

   NEW YORK - 5/10/2013 - Mission Settlement Agency, its owner Michael Levitis and three of its employees – Denis Kurlyand, Boris Shulman and Manuel Cruz – were charged recently with mail and wire fraud charges in connection with a multi-million dollar scheme that victimized more than 1,200 debt-ridden individuals across the country, announced U.S. Attorney for the Southern District of New York Preet Bharara and Inspector-in-Charge of the New York Office of the U.S. Postal Inspection Service (USPIS) Philip R. Bartlett.
   As alleged, the defendants fraudulently tricked people into paying Mission for debt settlement services by lying to prospective customers about its fees and its purported affiliation with the federal government and one of the three leading credit bureaus in the U.S., as well as the results it supposedly achieved for its customers. 
   In connection with the scheme, Mission received over $6.6 million in fees. For over 1,200 of its customers, Mission took fees totaling nearly $2.2 million and has never paid a penny to the customers’ creditors. Each of the individual defendants was arrested this morning. They are expected to be arraigned in New York federal court before U.S. District Judge Paul G. Gardephe. Also unsealed were the guilty pleas of two former Mission employees, Felix Lemberskiy and Zakhir Shirinov, for their participation in the fraudulent scheme. 
   Shirinov pleaded guilty pursuant to an information before U.S. District Judge Denise Cote on April 26, 2013 and Lemberskiy pleaded guilty pursuant to an information before U.S. District Judge Ronnie Abrams on April 29, 2013. 
   In a separate action, the Consumer Financial Protection Bureau (CFPB) announced civil charges against Mission and Levitis, among others.
    “As alleged, Mission preyed upon the financial desperation of people around the country who – like so many ordinary Americans – were simply struggling to pay down their debts after the financial downturn. But the true mission of Mission turned out to be fraud and deceit, and for more than 1,200 consumers, the dream of debt relief turned into a nightmare of deeper debt trouble. Today’s case is a harbinger of an especially potent partnership between this Office and the CFPB that will benefit hardworking Americans everywhere,"   Bharara said.  
   According to the allegations in the indictment unsealed today and the forfeiture complaint filed in New York federal court: 
Background 
   Since its inception in 2009, Mission has offered “debt settlement” services to financially disadvantaged individuals who were struggling or unable to pay their credit card debts. Like other purported debt settlement providers, Mission held itself out as a company that could successfully negotiate to lower the overall debt its customers owed to credit card companies and banks. Levitis operated and controlled Mission which, at varying times, had offices in Brooklyn and/or Manhattan, N.Y. 
   The defendants targeted financially disadvantaged individuals known to be struggling to pay credit card debt and reached out to them through telemarketing and mail solicitations. Thereafter, Mission’s sales representatives typically spoke to the prospective customers on the phone, describing Mission’s work and its ability to renegotiate debt. Where an individual ultimately expressed an interest in engaging Mission, Mission then had the individual enter into a contract. 
Overview of the Fraud 
   From 2009 through May 2013, the defendants systematically exploited and defrauded over 1,200 financially disadvantaged individuals across the country who were struggling to pay their credit card debts. The individual defendants falsely and fraudulently tricked them into becoming Mission’s customers by making materially false and misleading statements about Mission’s ability to help settle their debts and about the fees Mission would charge in exchange for that help. 
   Specifically, the defendants commonly lied about and/or concealed Mission’s fees, falsely stating both verbally and in their written solicitations, that Mission would charge a mere $49 per month and/or that there would be no up-front fees. In fact, Mission took thousands of dollars in up-front fees from funds that its customers had set aside because they had been told the funds would be held in escrow and used to pay creditors. The defendants also deceived prospective customers by fraudulently promising that Mission could help slash their debts – typically by 45% – when, for the majority of customers, Mission actually did little or no work and failed to achieve any reduction in debt whatsoever. And the defendants deceptively created an air of legitimacy for Mission’s business by falsely suggesting that it had affiliations with the federal government and with one of the three leading credit bureaus in the U.S. 
   Overall, Mission had approximately 2,200 customers who paid a total of nearly $14 million in connection with its purported debt settlement services. Of these funds, Mission took over $6.6 million in fees, while paying only approximately $4.4 million to customers’ creditors. For over 1,200 of its customers, Mission took fees totaling nearly $2.2 million, but never paid a single penny to the customers’ creditors as payment for any negotiated debt. Levitis used the money that Mission took from its customers to pay for things including the operating expenses of a restaurant/nightclub he controlled, lease payments for two different luxury Mercedes cars and credit card bills for his mother. 
Lies About Mission’s Fees 
   In conversations with prospective customers, the defendants represented that customers would be asked to make affordable monthly payments for a set period of time, that these payments would be held in escrow by a third-party payment processor until Mission had negotiated down the customers’ debt obligations and that the money held in escrow would then be used to pay the creditors. The defendants further promised that Mission would only charge a nominal monthly fee of $49 in exchange for its efforts and they often explained that Mission would charge an additional fee only if it succeeded at obtaining a greater reduction in debt than what had been promised. They also claimed in both their written solicitations and in scripted phone calls that there were no up-front fees. 
   In reality, in addition to the $49 monthly fee, Mission also charged an up-front fee equal to as much as 18% of the debt the customer owed. Mission deducted these fees from the monies that customers paid to the third party payment processor, in accordance with a monthly payment plan it established and that customers understood would be held in their escrow accounts and used to pay their creditors. Instead, Mission regularly took as fees for itself all of the funds that its customers paid to the payment processor during the first three months of their contracts with Mission. This was done in order to insure that the company would receive up-front fees before any of the customers’ debt was even paid down. Lies About Mission’s Results The defendants typically promised prospective customers that Mission would negotiate a substantial reduction in their debt, promising prospective customers that they would have to pay only 55% of the amount owed to creditors. 
   When potential customers questioned that assertion because it sounded too good to be true, a written script directed sales representatives to tell them: “The creditors today are content to get the settled amount in light of all the bankruptcies, charge offs and bad debt out there today.” This assertion and the underlying promise were false. In reality, Mission did little or no meaningful work to negotiate reductions in debt for many of its customers and the sort of result Mission was promising prospective customers was substantially more favorable than the results Mission typically achieved for prior customers. The written script also instructed sales representatives to promise potential customers that if they worked with Mission, their credit scores would ultimately go up. 
   The script said, “Your credit score will go down in the short term while the accounts are put into position for settlement. Then your score will go up as the payments are made and ultimately your score will be significantly higher.” 
   This was also untrue. 
Lies About Mission’s Affiliations 
   The defendants also made material misrepresentations to prospective customers about Mission’s relationships and affiliations in a deceptive effort to make Mission seem more credible and trustworthy. For example, in an effort to attract business, Mission sent a solicitation letter to prospective customers that falsely suggested that it was acting on behalf of or in connection with a federal governmental program. The letter included an image of the Great Seal of the United States and indicated that it was coming from the “Reduction Plan Administrator” of the purported “Office of Disbursement.” However, the only phone number and address provided in the letter belonged to Mission and Mission did not have any relationship with any federal agency, nor was it operating in connection with any federal program. 
   Bharara also announced the filing of a civil forfeiture complaint seeking to forfeit the proceeds of the alleged fraud and the assets involved in money laundering related to the scheme. Those assets and proceeds include: the Rasputin nightclub, the title for which is in the name of Levitis’ mother, whom the government alleges is the real owner of the club; two pieces of real property; and 40 bank accounts.
   Levitis, 36, of Brooklyn, Kurlyand, 30, of Brooklyn, Shulman, 27, of Brooklyn, and Cruz, 30, of Brooklyn, are each charged with one count of conspiracy to commit mail and wire fraud, one count of wire fraud and one count of mail fraud. Each defendant faces a maximum sentence of 20 years in prison on each count. 
   Lemberskiy, 29, of Staten Island, New York and Shirinov, 29, of Brooklyn each pleaded guilty to one count of conspiracy to commit mail and wire fraud, one count of mail fraud and one count of wire fraud. They each face a statutory maximum sentence of 60 years in prison.
   Bharara praised the outstanding investigative work of the USPIS. He also thanked the CFPB for referring this case to this Office and acknowledged with appreciation, this extraordinary partnership. If you believe you were a victim of this crime, including a victim entitled to restitution and you wish to provide information to law enforcement and/or receive notice of future developments in the case or additional information, please contact Wendy Olsen-Clancy, the Victim Witness Coordinator at the U.S. Attorney's Office for the Southern District of New York, at (866) 874-8900, or Wendy.Olsen@usdoj.gov. 
   For more information, go to: http://www.usdoj.gov/usao/nys/victimwitness.html. For guidance on coping with debt or credit issues and information about dealing with debt settlement companies in particular, consider the following links to publications issued by the Federal Trade Commission and the Council of Better Business Bureaus: http://www.consumer.ftc.gov/articles/0150-coping-debt; and http://www.bbb.org/credit-management/overwhelming-obligations/advice-about-quick-easy-solutions/index.html. The prosecution of this case is being handled by the Office’s Complex Frauds Unit. Assistant U.S. Attorneys Nicole Friedlander and Edward Imperatore are in charge of the prosecution. Assistant U.S. Attorney Carolina Fornos of the Office’s Asset Forfeiture Unit is responsible for the forfeiture aspects of the case. The charges contained in the indictment are merely accusations and the defendants are presumed innocent unless and until proven guilty.

The Arms Debate

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