Law and Justice

 

Former DEA Special Agent

Sentenced to 13 Years in Prison

     (DOJ) - 8/15-2021 - A former Drug Enforcement Administration (DEA) Special Agent was sentenced on Aug. 12 to 160 months in prison for nine crimes related to official misconduct, including perjury, obstruction of justice, and theft.

    According to court documents, Chad Allan Scott, 53, of Covington, Louisiana, perjured himself and directed others to commit perjury to obtain a conviction against an alleged drug dealer. He also falsified forms so that he could take possession of a truck bought for him by a drug dealer. When he and two other law enforcement officers began to worry that they would be investigated, Scott and the others conspired to throw evidence of their wrongdoing into the swamps outside New Orleans. Scott also stole money and possessions from defendants his DEA group had arrested. Scott was found guilty in August 2019 and June 2021 after his case was severed into two separate federal trials by Federal District Court Judge Milazzo.

    “Chad Scott took an oath to serve his community with integrity, but rather than use his badge to protect his community, he used it to break the law,” said DEA Administrator Anne Milgram. “This goes against everything that the Drug Enforcement Administration stands for. Scott betrayed the very people he was entrusted to protect and today he is being held accountable for his crimes.”

    The case was initially investigated by the Louisiana State Police and later by the FBI, DEA Office of Professional Responsibility (OPR), and DOJ-OIG.

    Assistant Deputy Chief Timothy A. Duree of the Justice Department’s Fraud Section and Trial Attorney Charles A. Miracle of the Justice Department’s Narcotic and Dangerous Drug Section prosecuted the case.

    “While he was a law enforcement agent, Scott compromised cases and conspired to steal from the people he arrested,” said Special Agent in Charge Douglas B. Bruce of the Justice Department’s Office of the Inspector General (DOJ-OIG) Denver Field Office. “His actions were antithetical to the oath he swore to uphold. Now, he will rightly serve time for his many crimes.”

Millions Returned To Victims in Corruption Scheme

    ROCHESTER, NY - 1/22/2012 - U.S. Attorney William J. Hochul, Jr. announced on January 18 that more than $10 million in forfeited property has been returned to the victims of one of the largest public corruption cases ever prosecuted in the Western District of New York. Those receiving restitution include the Eastman Kodak Company, the Town of Greece, IBM, ITT Industries, Inc., RG&E, and Global Crossing. The companies and town were all victims of real property tax appraisal and assessment schemes spearheaded by John Nicolo, a property appraiser.
   In 2005, John Nicolo, Mark Camarata, Charles Schwab, David Finnman, and others were arrested and later convicted of a variety of crimes including mail and wire fraud, conspiracy, and money laundering. The defendants schemed victims out of millions of dollars by artificially inflating tax assessments on properties they owned, and then causing John Nicolo to be hired by the companies in an effort to reduce the resulting tax assessments.
   Assistant U.S. Attorney Richard A. Resnick, who prosecuted the case, stated that David Finnman and Mark Camarata, while working at Kodak, hired Nicolo to perform real property appraisal services for Kodak between 1997 and 2005. In return for hiring Nicolo, Finnman, and Camarata would receive money representing kickbacks from Nicolo. In addition, Charles Schwab, while the Greece Town Assessor, also received kickbacks from Nicolo in connection with various property tax assessment matters involving property located in Greece.
   The forfeiture aspect of the case resulted in considerable litigation over the several years following the criminal convictions. In February 2009, U.S. District Judge David G. Larimer ultimately agreed with the Government’s position and ordered over $12,000,000 in assets to be forfeited from the various defendants. The ruling spurred further litigation involving John Nicolo’s wife, Constance Roeder, who claimed that much of the money was hers and had nothing to do with Nicolo’s crimes. In November 2011, Judge Larimer approved a settlement which awarded the government more than $10 million and returned $2 million to Constance Roeder, which was determined not to have been involved in her husband’s appraisal fund.
   Of the $10,000,000 settlement, the Eastman Kodak Co. received $7,800,000 and the Town of Greece received $1,900,000. In addition, IBM received $70,000, RG&E $13,000, ITT Space Systems, LLC $633,000, and Global Crossing $33,750.
   The majority of the properties forfeited involved large financial accounts where John Nicolo concealed his illegal proceeds. Some of the accounts were valued in excess of several million dollars. Nicolo also forfeited BMW and Volvo automobiles and a Bentley, valued at $165,000, which was purchased with illegal cash just months prior to its seizure in 2005. In addition, Mark Camarata forfeited almost $1,000,000 and the government seized high-end vehicles and two residences from Charles Schwab, one of which was a home in an exclusive South Carolina golf community.
   Furthermore, a vacation home and a number of parcels overlooking Keuka Lake, worth approximately $500,000, are still to be sold. That money will be forfeited to the government and used to assist law enforcement in further criminal investigations in our community.
   Following the criminal prosecution, John Nicolo and Charles Schwab were sentenced to 12 years in federal prison, Mark Camarata was sentenced to 24 months, and David Finnman received 21 months.
   “This case sends a strong message that public corruption and corporate fraud will not be tolerated,” said U.S. Attorney Hochul. “Those who attempt to make financial gains by victimizing others not only risk destroying their families but also losing their freedom. As this case demonstrates, our office is also fully prepared to utilize the federal forfeiture laws to take the ‘profit’ out of such crimes by stripping defendants of their illicit proceeds and returning them to innocent victims where they belong.”
   The successful prosecution and restitution are the result an investigation by special agents of the Federal Bureau of Investigation, under the direction of Special Agent in Charge Christopher M. Piehota; the Internal Revenue Service, under the direction Special Agent in Charge Charles R. Pine; the Postal Inspection Service, under the direction of Inspector in Charge Robert Bethel; and the Greece Police Department, under the direction of Chief Todd K. Baxter.
   Source: Release, U.S. Attorney's Office, Western District of New York (FBI, Buffalo Division).

Public Company Insiders Face Conspiracy Charges

   NEW YORK – 12/17/10 - An executive for an “expert-networking” firm was arrested on Dec. 13 on wire fraud and conspiracy charges, announced Preet Bharara, U.S. Attorney for the Southern District of New York, and Janice K. Fedarcyk, Assistant Director-in-Charge of the New York Office of the FBI.
   James Fleishman was arrested for conspiring to provide confidential information, including material, non-public information to the firm’s clients, including hedge funds. Daniel Devore, formerly a global supply manager for Dell Inc., who worked as a consultant for the firm, previously pleaded guilty on Dec. 10, 2010, to an information charging him with wire fraud and conspiracy to commit wire fraud and securities fraud.
   U.S. Attorney Bharara and Assistant Director-in-Charge Fedarcyk also announced the arrests on the mornign of Dec. 13 of public company employees Mark Anthony Longoria, Walter Shimoon and Manosha Karunatilaka on wire fraud and conspiracy to commit securities fraud and wire fraud charges in connection with their employment as consultants for the firm.
   According to the complaint and information unsealed on Dec. 13 in federal court in Manhattan:

The Firm and Fleishman’s Employment

   The firm advertised itself as an “independent investment research firm that provides institutional money managers and analysts with market intelligence,” through a “Global Advisory Team of Experts.”
   The firm advertised that its team of consultants “have real-world experience in industries such as healthcare, technology, media, telecommunications, retail, manufacturing, energy and aerospace.”
   The firm stated that its consultants “speak one-on-one with [firm] clients to provide up-to-the-minute intelligence on trends, issues, regulations and dynamics affecting a particular company, product or industry.”
   Consultants who became part of the firm’s expert network can earn hundreds of dollars per hour or per call from the firm for their consultations with firm clients. Firm clients, which included hedge funds, often paid the firm tens of thousands of dollars annually for access to the firm’s consultant network and services.
Fleishman, 41, of Santa Clara, Calif., served as a sales manager for the firm responsible for attracting new clients and ensuring service to existing clients. Fleishman promoted the firm’s consultation services by arranging for clients, including hedge funds, to speak with consultants knowing that consultants would provide confidential information, including inside information, to clients.

Devore Provided Confidential Information

About Dell and Dell’s Suppliers, Including Inside Information

   Devore was employed by Dell Inc. (Dell), as a global supply manager. While employed at Dell, Devore provided confidential information about Dell and Dell’s suppliers, including Inside Information, to clients of the    Firm, including hedge funds. Between late 2007 through August 2010, the firm paid Devore approximately $145,750 for providing information, including inside information, to the firm and, directly and indirectly, to firm clients.

   Longoria Allegedly Provided AMD Confidential Information,

Including Inside Information

   Longoria, 44, of Round Rock, Texas, was employed by Advanced Micro Devices Inc. (AMD), as a supply chain manager in Round Rock. As part of his employment with AMD, Longoria executed an employment agreement with AMD that restricted the disclosure of AMD confidential information.
   While employed at AMD, Longoria engaged in consultation calls with firm clients. During the consultation calls, Longoria allegedly provided confidential AMD information, including inside information. For example, during telephone calls with cooperating witnesses in July 2009, Longoria provided AMD revenue information, average sales prices, product sales figures and gross margin information. Between January 2008 and March 2010, the firm paid Longoria more than $200,000 for consultation services he provided.

Shimoon Provided Flextronics and Apple Confidential Information,

Including Inside Information

   Shimoon, 39, of San Diego was employed by Flextronics International Ltd. (Flextronics), as a senior director of business development in San Diego. During the relevant time period, Flextronics had a business relationship with Apple Inc. pursuant to which Flextronics supplied certain electronic components to Apple, including specifically-engineered camera and charger components to Apple for its “iPhone” cellular telephones and “iPod” portable media players.
   As part of this business relationship, Flextronics and certain Flextronics employees were provided with information and forecasts regarding Apple purchase or shipping orders regarding certain Flextronics components, as well as information regarding alternative suppliers for Apple products. The confidentiality of this kind of information was governed by non-disclosure agreements executed between Flextronics and Apple. In addition, Apple often shared information with Flextronics about future Apple products under development.
  The confidentiality of this information was governed by a separate non-disclosure agreement executed between Flextronics and Apple. For example, in or about 2009, Apple informed Flextronics about a highly secretive project being developed that ultimately resulted in the public product launch of the “iPad” tablet computer.
   Shimoon also signed an employment agreement with Flextronics that restricted the disclosure of Flextronics confidential information and prohibited any business activity that competed with Flextronics’ business.
   While employed at Flextronics, Shimoon allegedly engaged in consultation calls with firm clients, during which he provided confidential Flextronics and Apple information, including Inside Information. For example, Shimoon provided highly confidential sales forecast information and new product features for Apple’s forthcoming “iPhone” cellular telephone. Between January 2008 and June 2010, the firm paid Shimoon more than $22,000 for consultation services he provided.

Karunatilaka Provided TSMC Confidential Information,

Including Inside Information

   Karunatilaka, 37, of Marlborough, Mass., was employed by Taiwan Semiconductor Manufacturing Company Inc. (TSMC) as an account manager. As part of his employment with TSMC, Karunatilaka executed an employment agreement with TSMC that restricted the disclosure of confidential information and prohibited any outside employment.
   While employed at TSMC, Karunatilaka engaged in consultation calls with firm clients, during which he allegedly provided confidential TSMC information, including inside information such as TSMC product sales and shipping information. Between January 2008 and June 2010, the firm paid Karunatilaka more than $35,000 for consultation services he provided.
   “Today’s charges allege that a corrupt network of insiders at some of the world’s leading technology companies served as so-called ‘consultants’ who sold out their employers by stealing and then peddling their valuable inside information,” U.S. Attorney Preet Bharara said. “The detailed allegations in the complaint, along with the guilty plea unsealed today, describe criminal conduct that went well beyond any legitimate information-sharing or good faith business practice. Over the next many months and beyond, we will continue to enforce the law, police the market, and protect honest businesses and their shareholders by working methodically with the FBI and Securities and Exchange Commission (SEC) to root out corporate corruption and insider trading.”
   “The information trafficked by the four ‘consultants’ went way beyond permissible market research; it was insider information,” FBI Assistant Director-in-Charge Janice K. Fedarcyk said. “And the fifth defendant was directly involved in the transfer of inside information from the consultants to hedge funds and other end users.
   The more than $400,000 the firm paid the four ‘consultants,’ merely to participate in phone calls with firm clients, is an indication of the value placed on the information. This wasn’t market research. What the defendants did was purchase and sell insider information. Our investigation is most assuredly continuing.”
   U.S. Attorney Bharara praised the investigative work of the FBI. He thanked the SEC for its assistance in this matter. He also thanked Apple, Flextronics, AMD, TSMC and Dell for their assistance in the investigation.
   U.S. Attorney Bharara noted that the investigation is continuing.
This case was brought in coordination with President Barack Obama’s Financial Fraud Enforcement Task Force, on which U.S. Attorney Bharara serves as a co-chair of the Securities and Commodities Fraud Working Group.
   The case is being handled by the U.S. Attorney’s Office’s Securities and Commodities Fraud Task Force. Assistant U.S. Attorneys Reed Brodsky, Antonia Apps and David Leibowitz, and Special Assistant U.S. Attorney Andrew Michaelson are in charge of the prosecution.
  Source: http://www.stopfraud.gov/