Investment Fund Chief Pleads Guilty in Scheme

   NEW YORK - July 19, 2013 - Abdul Walji and Reniero Francisco, the chief executive officer and president, respectively, of Arista LLC (Arista), a California investment fund, pleaded guilty on July 2 in New York federal court to defrauding and misappropriating nearly $10 million from more than 35 investors by misrepresenting the nature and performance of the fund, and issuing fraudulent account statements to investors to cover up massive losses, announced Preet Bharara, the U.S. Attorney for the Southern District of New York.
   Walji also pleaded guilty to perpetrating a multi-million dollar fraudulent scheme with pension plan funds that he managed through three California-based trusts: Allied Benefits Inc., Allied Benefits Trust, and Stone Lamm Trust (collectively, the Trusts). Both defendants were charged in December 2012, and pleaded guilty today before U.S. District Judge Denise Cote.
    “Abdul Walji and Reniero Francisco told one lie after another in order to squeeze millions of dollars out of their investors, even as they misappropriated nearly $10 million, including at least $2.7 million solely for their own personal benefit,” Bharara said. “Walji even went a step further and orchestrated a second scheme that ultimately cost his victims another approximately $9.5 million. With today’s guilty pleas, they will begin to be held responsible for their actions and repay those wronged by their unlawful conduct.”
   According to the three-count superseding information to which Walji pleaded guilty, the indictment to which Francisco pleaded guilty, the defendants’ plea agreements and other documents in the public record:    
   The Arista Fraudulent Scheme :
   Arista began operations as an investment firm in February 2010, with its principal place of business in Newport Coast, Calif. In April 2011, Arista became a registered commodity pool operator with the U.S. Commodity Futures Trading Commission, and a National Futures Association member.
    In early 2010, Walji and Francisco began to solicit individuals to invest in Arista. From 2010 through 2011, the defendants carried out their fraudulent scheme through three methods. First, Walji and Francisco misrepresented to several Arista investors the nature of the company’s investments and the returns that investors would receive from investing in Arista. For example, Walji and Francisco falsely told investors that their money would be invested in safe, risk-free securities, when in fact much of the money was invested in options and futures. Second, Walji and Francisco sent fraudulent account performance statements to Arista investors that misrepresented the value of their investments. In an effort to secure additional contributions, the defendants also concealed Arista’s trading losses, and told investors that they were profiting from their investments when they were actually losing money. Finally, Walji and Francisco misappropriated at least $2.7 million from Arista’s investors through fees to which they were not entitled, and which Walji and Francisco diverted for their own personal benefit. Based on their false representations, Walji and Francisco collected nearly $10 million from over 35 investors, and they ultimately misappropriated a large portion of the money.
    From early 2008 through June 2013, Walji also perpetrated a separate fraudulent scheme using pension plan funds that he administered. Similar to the scheme set forth above, Walji executed his fraudulent scheme through three principal methods. First, Walji made oral misrepresentations to existing and potential clients of the Trusts concerning: (i) the nature of the Trusts’ pension plan investments; (ii) the investment value and past performance of the pension plans; and (iii) the source of funds distributed to plan participants who had reached retirement and/or who had requested distributions. Second, Walji distributed fraudulent statements to clients concerning the value of their accounts and the prior performance of their pension plans in order to forestall redemption requests, induce new clients to contribute to the plans, and induce existing clients to make additional contributions. As selected clients reached retirement age or requested disbursements, Walji sent those clients money that he represented to be proceeds of their individual pensions, when in fact he knew that the purported disbursements were often funds contributed by other clients. Third, Walji misappropriated approximately $300,000 of client funds for his personal use. In total, this scheme caused losses to approximately 35 additional victims in an aggregate amount of approximately $9.5 million.
   Walji, 60, of San Juan Capistrano, Calif., pleaded guilty to one count of conspiracy to commit securities fraud and wire fraud, one count of commodities fraud, and one count of securities fraud. The securities fraud charge carries a maximum sentence of 20 years in prison; the commodities fraud charge carries a maximum sentencing of 10 years in prison; and the conspiracy charge carries a maximum sentence of five years in prison. Francisco, 57, of Newport Coast, Calif., pleaded guilty to one count of conspiracy to commit securities fraud and wire fraud and one count of securities fraud.
   In connection with their guilty pleas, Walji consented to forfeit $13.6 million and Francisco consented to forfeit $4.1 million. The defendants also agreed to forfeit the proceeds of several bank and trading accounts.
   This case is being handled by the U.S. Attorney’s Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys David I. Miller and Christopher D. Frey are in charge of the prosecution. Assistant U.S. Attorney Paul Monteleoni is in charge of the asset forfeiture related to the prosecution.
   Source: Financial Fraud Enforcement Task Force

Domestic Surveillance Practices Are Indefensible

                     By Steve Rensberry
                          Commentary
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   (RPC) - 7/4/2013 - The massive data mining practices currently being undertaken by agencies in the United States are like a knife in the heart to a free and open society.
   Irrespective of the government's stated intent that it means us no harm and that they are only seeking to protect us from terrorism, the mass surveillance and collection of an entire population's Internet communications and phone records--and who knows what else--is deeply damaging to the body politic.
   The goal, it would seem, is not merely to apprehend criminals and punish them when others are hurt, but to predict the behavior of all of us through an analysis of both our behavior and thoughts -- gleaned from the words we use and the things we share and derived from digital algorithms and selected criteria hatched behind guarded doors and the walls of secretive agencies. There is nothing inherently wrong with taking reasonable steps to prevent crime, but what is freedom worth without the basic right to free and open communication? Digital communication is all but ubiquitous in a modern society.
   The government, and the National Security Agency in particular, has no justifiable reason in digging for data on innocent Americans, or in collecting metadata that contains details of who people talk to, what they read and what they do in the digital world. Certainly the objective of fighting terrorism can be accomplished with far less intrusive means, that respects our privacy.
   What we now know is that every email you send to your relatives, every phone call you make and receive, every business dealing,  financial transaction and text message that you make using electronic communication, will now be analyzed, scanned, profiled and stored indefinitely for easy access by agents snooping for dirt.
   Who will be watching the watchers?
   It is not Google the search engine you will be using to search the Internet. It is, for all practical purposes, a government search engine. The same can be said for Yahoo, Microsoft's Bing, Facebook and all the rest of today's Internet giants who are now routinely ordered to hand over records containing some of the most personal electronics transactions we make.
   Entrusting our data with private-sector corporations is one thing. Having it collected and stored by powerful government agencies as though we were common criminals who need constant surveillance is another thing entirely.
   David Rosen, writing about "6 Government Survillance Programs Designed to Watch What You Do Online," noted in June of 2012 the growing list of methods by which the U.S. government tracks, without probably cause, the behavior and habits of its own civilians. These include a procedure by the Justice Department's Computer Crime and Intellectual Property section to gather data from social networking sites in order to "establish motives and personal relationships"; the IRS practice of using sites such as Facebook and Google to investigate taxpayers; an effort by the Director of National Intelligence to obtain a mechanism to "integrate all online information,"; a Defense Department effort involving a "Social Media Strategic Communications (SMISC) program; and an FBI effort to develop an "FBI Social Media Application," program.
   Add to these a long list of other government surveillance projects such as the Nationwide Suspicious Activity Reporting Initiative; PRISM; DCSNet: Main Core: NSA Call Database; Intelligence Community (IC); Financial Crimes Enforcement Task Force: Terrorist Finance Tracking Program; Tailored Access Operations and Boundless Informant .
   A June 15, 2013 story by the Associated Press entitled "PRISM part of a much larger government surveillance program,"  cites a program called US-98XN which predates the PRISM program and which it says has been collecting data on U.S. citizens from private sector companies for years.
   Other past efforts have included Project Echelon, the Total Information Awareness System, the COINTELPRO program and Spygate.
   Computer and digital technology has provided us with tremendous freedom to express our ideas and to communicate, all at speeds that would have been unimaginable just 20 years ago. We can send, receive and store practically an endless number of photos, documents and messages.
   But it's a freedom that clearly has become a two-edged sword.
   It's sad and unfortunate, but the days of deep encryption, digital privacy fences, multiple aliases and the serious mistrust of everything we see and hear, appear poised to grow exponentially.
   Unless things change, the days of a free and open Internet, of corporations that can be trusted to safeguard our data for an exchange of services and revenue, would appear all but dead. (Edited with corrections, July 5, 2013)

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