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.

   Source: Financial Fraud Enforcement Task Force

Holding Company CEO Charged with Bank Fraud

   BROOKLYN, N.Y. – 4/13/2012 - The former chief executive officer of a publicly held food products company that traded on the NASDAQ and manufactured and distributed a line of baking mixes and spices was indicted on April 13 on conspiracy, bank fraud and false statement charges arising out his scheme to inflate Synergy’s sales through a $26 million bank fraud scheme. Mair Faibish, the former chief executive officer of Synergy Brands Inc., was arrested earlier in the day and was due to appear in court before U.S. Magistrate Judge Viktor V. Pohorelsky in Brooklyn.
   The charges were announced by Loretta E. Lynch, U.S. Attorney for the Eastern District of New York; James T. Hayes Jr., Special Agent-in-Charge, Department of Homeland Security (DHS), Homeland Security Investigations (HSI), New York Field Office; and Nassau County, N.Y., Police Commissioner Thomas V. Dale.
    As alleged in the indictment, the defendant and his co-conspirators fraudulently inflated Synergy’s sales by approximately 20 percent for the quarter ending June 30, 2008, through an international check kiting scheme in which they kited approximately $750 million worth of checks not backed by sufficient funds through various banks in the United States and Canada.
   The defendant caused those checks to be deposited into bank accounts of associated food manufacturers and distributors in Canada. The Canadian companies then sent checks in corresponding amounts, but also not backed by sufficient funds, back to Synergy. Because the banks made deposited funds immediately available for withdrawal, the scheme artificially inflated the companies’ bank account balances while the scheme was ongoing. The defendant and his co-conspirators used Synergy’s fraudulently inflated bank account balance to book millions of dollars in fictitious accounts receivable and revenue. By the end of the scheme, Signature Bank had lost approximately $26 million that the defendant and his co-conspirators had withdrawn before the bank discovered the scheme.
   In addition to the bank fraud and conspiracy charges, the indictment charges that the defendant made false statements to the U.S. Securities and Exchange Commission (SEC) about Synergy’s financial condition in a public filing, specifically: (1) that Synergy had approximately $44.5 million in sales, when approximately 20 percent of those sales were fictitious; (2) that Synergy had approximately $40 million in cost of goods sold, when approximately 20 percent of the cost of goods sold was fictitious; and (3) that Synergy recognized approximately $1.5 million in “prepaid expenses,” when at least 25 percent of those prepaid expenses were fictitious.
    According to the company’s filings with the SEC, Synergy was a holding company with subsidiaries that distributed nationally known food and beauty products to retailers and wholesalers and manufactured baking products through its Loretta Baking Mix Products subsidiary. Synergy also sold premium cigars to restaurants, hotels, casinos and country clubs as well as directly to consumers over the Internet and through its retail store in Miami.
   “The defendant allegedly defrauded an FDIC-insured bank out of millions of dollars through a massive check-kiting scheme, as well as fraudulently inflated Synergy’s financial statements in order to make the struggling company appear prosperous. These false representations were then provided to the SEC and the investing public,” Lynch said. “Corporate executives who abuse their positions of trust can expect to be investigated and prosecuted to the full extent of the law.”
   If convicted, the defendant faces a maximum sentence of 30 years in prison on the most serious charge in the indictment.
   The government’s case is being prosecuted by Assistant U.S. Attorneys Ilene Jaroslaw and Sylvia Shweder.
   Source: Financial Fraud Enforcement Task Force

Brokerage Firm Chief, Stock Promoter Convicted

   WASHINGTON – 2./2/2012 - The principal of a Costa Rican brokerage firm and a Las Vegas stock promoter were each convicted on January 31 in the Southern District of Florida of all charges for their roles in a stock manipulation scheme that defrauded investors, announced Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Wifredo A. Ferrer of the Southern District of Florida, Chief Postal Inspector Guy Cottrell of the U.S. Postal Inspection Service (USPIS) and James W. McJunkin, assistant director in Charge of the FBI’s Washington Field Office.
   Jonathan Curshen, 47, the principal of Red Sea Management and Sentry Global Securities, two companies located in San Jose, Costa Rica, that provided offshore accounts and facilitated trading in penny stocks, was found guilty of conspiracy to commit securities fraud, wire fraud and mail fraud; two counts of mail fraud; and conspiracy to commit international money laundering. Nathan Montgomery, 30, a Las Vegas stock promoter, was found guilty of conspiring to commit securities fraud and wire fraud.
   The evidence at trial showed that in January and February 2007, Curshen, of Costa Rica and Sarasota, Fla., and Montgomery, of Las Vegas, were involved in a scheme to illegally manipulate the stock price of a company called CO2 Tech (ticker CTTD), which traded on the Pink Sheets, an inter-dealer electronic quotation and trading system.
   Evidence at trial showed that Curshen’s and Montgomery’s co-conspirators controlled the outstanding shares of CO2 Tech, which were used in the stock manipulation scheme. Montgomery and his conspirators engaged in coordinated trades in conjunction with the issuance of false and misleading press releases that were designed to artificially inflate the price of CO2 Tech shares to make it appear that it had significant business prospects. According to these press releases, CO2 Tech purported to have a business relationship with Boeing to reduce polluting gases emitted from airplanes, when in fact CO2 Tech never had any business or relationship with Boeing.
   According to the evidence at trial, Montgomery and his co-conspirators, Robert Weidenbaum, Timothy Barham Jr., Ryan Reynolds and others fraudulently “pumped” the market price and demand for CO2 Tech stock through these press releases and coordinated trades of shares of CO2 Tech stock in order to create the appearance of legitimate buying interest by legitimate investors. The evidence showed that as Montgomery and his conspirators pumped the price of the stock, Curshen and his conspirators facilitated the “dumping” of shares through the trading desk at Red Sea and Sentry Global Securities by selling the shares at the direction of their conspirators to the general investing public. The evidence showed that these shares, which became virtually worthless, were purchased by unsuspecting investors, including investors in the Southern District of Florida. The evidence showed that Montgomery, Weidenbaum, Reynolds and Barham were paid approximately $1 million in cash by their conspirators to participate in sham stock trades of CO2 Tech. The cash was delivered to Miami via a private jet from an airport outside New York.
   The evidence further showed that, from approximately 2003 through 2008, Curshen operated Red Sea as a money laundering hub in Costa Rica that established bank accounts and brokerage accounts in the United States and Canada under false pretenses and through nominee owners. The evidence further showed that Curshen and his co-conspirators laundered the proceeds of the stock fraud from accounts in the United States to an account in Canada, all in an effort to conceal and disguise the nature and source of the proceeds.
   At sentencing, Curshen faces a sentence of up to five years in prison on the conspiracy to defraud count, and up to 20 years on each count of mail fraud and money laundering conspiracy. Montgomery faces a sentence of up to five years for the conspiracy to defraud count. The defendants are scheduled to be sentenced by Judge Richard W. Goldberg on May 11, 2012.
   Stock promoters Weidenbaum, Barham and Reynolds, who were also charged in this case, previously pleaded guilty to conspiring to commit securities fraud, wire fraud and mail fraud. They also will be sentenced by Judge Goldberg on May 9, 2012. Michael Simon Krome, a securities attorney from New York, who participated in the conspiracy and evaded federal securities registration requirements in order to provide co-conspirators with millions of unregistered and “free trading” shares of CO2 Tech that were used to execute the stock manipulation, also pleaded guilty to conspiring to commit securities fraud, mail fraud and wire fraud.
  The case was investigated by the FBI’s Washington Field Office and the USPIS. The case is being prosecuted by Trial Attorneys N. Nathan Dimock and Rina Tucker Harris of the Fraud Section in the Justice Department’s Criminal Division. The U.S. Attorney’s Office for the Southern District of Florida provided significant assistance in this case. The Department of Justice acknowledges the significant assistance of the Financial Industry Regulatory Authority (FINRA) and the U.S. Securities and Exchange Commission (SEC) in its investigation. The SEC has a pending parallel civil case. The Criminal Division’s Office of International Affairs and Costa Rican authorities also provided assistance.
Source: Financial Fraud Enforcement Task Force

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).

Two Plead Guilty in $5.2 Million Medicare Scheme

   WASHINGTON -  1/21/2011 - Two owners of a Houston health care company pled guilty Jan. 20  in connection with an alleged $5.2 million Medicare fraud scheme, announced the Departments of Justice and Health and Human Services (HHS).
   Clifford Ubani, 52, and Princewill Njoku, 51, each pled guilty before U.S. District Court Judge Nancy Atlas in Houston to one count of conspiracy to commit health care fraud, one count of conspiracy to pay kickbacks and 16 counts of payment of kickbacks to Medicare beneficiary recruiters.
   According to court documents, Ubani and Njoku were owners and operators of Family Healthcare Group (Family Group), a home health care company. Family Group purported to provide skilled nursing to Medicare beneficiaries. According to court documents, Ubani and Njoku hired co-conspirators to recruit Medicare beneficiaries for the purpose of filing claims with Medicare for skilled nursing that was medically unnecessary and/or not provided. Ubani and Njoku admitted that they paid kickbacks to the recruiters for their referrals.
   Ubani and Njoku previously pled guilty to conspiracy to commit health care fraud related to their ownership of another Houston health care company, Family Healthcare Services (Family Services). Family Services submitted approximately $1.1 million in fraudulent claims to Medicare for the costs of durable medical equipment.
   At sentencing, scheduled for July 19, 2011, Ubani and Njoku each face a maximum sentence of 10 years in prison for each health care fraud conspiracy count, five years in prison for each kickback conspiracy count and five years in prison for each kickback count.
   Today’s guilty pleas were announced by Assistant Attorney General of the Criminal Division Lanny A. Breuer; U.S. Attorney José Angel Moreno of the Southern District of Texas; Special Agent-in-Charge Richard C. Powers of the FBI’s Houston Field Office; Special Agent-in-Charge Mike Fields of the Dallas Regional Office of HHS Office of Inspector General (HHS-OIG), Office of Investigations; and Texas Attorney General Greg Abbott.
   This case is being prosecuted by Trial Attorneys Charles D. Reed and Laura Cordova, and Assistant Chief Sam S. Sheldon of the Criminal Division’s Fraud Section. The case was brought as part of the Medicare Fraud Strike Force, supervised by the U.S. Attorney’s Office for the Southern District of Texas and the Criminal Division’s Fraud Section.
  Source: U.S. Department of Justice. For further information, visit: www.stopmedicarefraud.gov