Adviser Pleads Guilty in $7 Million Ponzi Scheme

   MICHIGAN - 4/21/2011 - Dante DeMiro, 43, of Milford, pled guilty on April 19 to five counts of bank and wire fraud, United States Attorney Barbara McQuade has announced. Sentencing is scheduled for July 12 at 10 a.m. before the Honorable Lawrence P. Zatkoff in Port Huron, Mich.
   According to court documents, DeMiro was an investment adviser to various municipalities, credit unions, school districts, and trade unions through his Southfield-based companies MuniVest Financial Group and MuniVest Services LLC.
   From August 2007 to September 2010, DeMiro used the MuniVest entities to operate a bank and wire fraud Ponzi scheme. DeMiro falsely promised investor clients that he would invest their funds in various certificates of deposit. He did not invest their funds as promised, but instead, used their funds to purchase personal items and real property, to gamble, to make payments to other investors in the same scheme, and to make loans to several individuals and a local jewelry store.
   DeMiro stipulated that the loss caused by his fraud exceeds $7 million, and that he abused a position of trust in his fiduciary capacity as an investment adviser.
   “We have seen more and more of these investment schemes, which prey upon school districts, municipalities, and unions,” McQuade said. “Our hope is that cases like this one will deter other investment advisers from stealing from these vulnerable investors.”
    The case is being prosecuted by Assistant United States Attorney Erin Shaw. Joining in the announcement was Special Agent in Charge Andrew Arena, Federal Bureau of Investigation (FBI).
    “Today's swindlers artfully conceal their greed with sophisticated marketing and numerous misrepresentations. Investors and pension plan participants must remain diligent in following their money,” Arena stated.
   Source: U.S. Department of Justice release.

CDC Cites Widespread Food Contamination in U.S.

   NEW YORK - (BUSINESS WIRE) - 4/16/2011 - According to the U.S. Centers for Disease Control, up to 48 million cases of illness in the United States each year are caused by spoiled or contaminated food. Many of these come from fresh produce that is consumed in its raw state. Two ways to ameliorate this “epidemic” are to improve our control over the conditions in which food is kept as it moves from farm to consumer markets or to enhance the traceability of food shipments within the supply chain.
   New US legislation (The Food Safety Modernization Act) focuses on the establishment of industry-wide data standards for this information, and requires the FDA to develop and publish regulations that address the prevention of foodborne disease outbreaks.
    According to ABI Research principal analyst Bill Arnold, “RFID (Radio Frequency Identification) systems with temperature sensors can contribute to less tainted produce and provide the same standards-based tracing, while delivering information that could prevent as much as $35 billion/year in wasted produce.”
    Once the initial FDA trials–to be conducted in partnership with industry associations such as the United Fresh Produce Association for produce and the American Meat Institute for fresh meats–are completed, the question will be: which stakeholders in the industry will actually buy and use these systems?
    “That is a very big question,” Arnold said. “It is of most benefit to food retailers, but they don't control the harvest point or the shipper, so it's a matter of who decides they either have the clout or the ability to make it happen. Self-interest and liability limitation will be the motivators. In some cases large retail chains will buy RFID systems and require their suppliers to use them. In other cases, large food brands such as Dole, Hawaiian Tropic, Chiquita and others may invest to promote their food freshness and safety, allowing them to justify a premium price.”
    ABI Research’s new “RFID-enabled Food Safety and Traceability Systems” study (http://www.abiresearch.com/research/1006522) reviews the Food Safety Modernization Act’s impact on food-industry use of auto ID technology in both the short and intermediate terms. It provides forecasts for the use of RFID-enabled data logging devices from 2010 through 2015 in cold chain applications.
    The report is part of the RFID Research Service (http://www.abiresearch.com/products/service/RFID_Research_Service). ABI Research provides in-depth analysis and quantitative forecasting of trends in global connectivity and other emerging technologies.

Is Illinois Next in Collective Bargaining Battle?

   By Andrew Thomason (Illinois Statehouse News) 4/10/2011 – Education reform in Illinois has gained serious momentum recently, but a day of meetings between all the major players on April 7 failed to produce a plan everyone could agree on.
   Changes to the firing and layoff processes and tenure have been ironed out, according to Illinois Sen. Kimberly Lightford, D-Maywood, who led the effort in the General Assembly. She said the sticking point now is collective bargaining, the ability for teachers' unions to negotiate items such as pay and benefits.
    “Collective bargaining by rights of union groups, that law hasn’t been touched since it was enacted (in 1983) and we’re really wanting them to do something that they haven’t had to do,” Lightford said. “You want to make sure that you work out as many details as possible and lead yourself into the tough areas that may take more focus and constructive dialog.”
    Plans floated in December would limit teachers’ ability to strike. Without the ability to strike at will, teachers would lose a lot of power at the negotiating table, unions say.
    For their part, the Illinois Education Association, the Illinois Federation of Teachers and the Chicago Teachers Union have been pushing their own reform plan that revolves around performance-based evaluations of teachers and principals, but doesn’t change collective bargaining.
    Illinois Education Association Executive Director Audrey Soglin told Illinois Statehouse News earlier this week that her organization didn’t plan to offer any compromises or changes to a collective bargaining system it views as working the way it was designed to.
    Charles McBarron, director of communications for the Illinois Education Association, said Friday that discussions are ongoing.
    “I think Sen. Lightford has run a fine process. We’re going to respect the process and I’m sure there will be more discussion of this next week,” he said.
    The other major player in changes to education in Illinois is Stand for Children, an education reform group that gained recognition last year in Illinois when it poured money into elections around the state. It has been a loud voice in calling for revamping the state’s education system, especially teacher tenure and the power of teacher unions.
    Much like the unions, Stand for Children was tightlipped about the ongoing talks.
    “Negotiations concerning legislation to improve the quality of public education in Illinois are ongoing. We look forward to a positive outcome," Jessica Handy, Stand for Children's Illinois policy director, said.
     What has been a fairly ad hoc approach to education reform has become finely honed in recent weeks. Lightford emphasized that while collective bargaining changes are what’s causing some delay right now, the big picture involves more than just teachers.
    “This is about the whole administration, the management team, the school board members and the effects leading to the child’s education,” she said.
    Lightford said she hopes to have some plan ready to go before the Senate the week of April 12.
    Story courtesy of Illinois Statehouse News. Originally published 4/8/2011.

Former CEO Pleads Guilty to $1.5 Billion Scheme

   WASHINGTON – 4/3/2011 - Paul Allen, the former chief executive officer at Taylor, Bean & Whitaker (TBW), pleaded guilty on April 1 to making false statements and conspiring to commit bank and wire fraud for his role in a $1.5 billion fraud scheme that contributed to the failure of TBW.
    Allen, 55, of Oakton, Va., pleaded guilty to a two-count criminal information before U.S. District Judge Leonie M. Brinkema in the Eastern District of Virginia. Allen faces a maximum penalty of five years in prison for each count when he is sentenced on June 21.
   According to a statement of facts submitted with his plea agreement, Allen joined TBW in 2003 as its CEO and reported directly to its chairman. He admitted in court that from 2005 through August 2009, he and other co-conspirators engaged in a scheme to defraud financial institutions that had invested in a wholly-owned lending facility called Ocala Funding. Ocala Funding raised money by selling asset-backed commercial paper to financial institutions, including Deutsche Bank and BNP Paribas , and used the money to purchase TBW mortgages. The facility was managed by TBW and had no employees of its own.
   According to court records, shortly after Ocala Funding was established, Allen learned there were inadequate assets backing its commercial paper, a deficiency referred to internally at TBW as a “hole” in Ocala Funding. Allen admitted that in an effort to cover up the hole and to mislead investors, he told a co-conspirator to produce reports that concealed the hole. He also admitted that he knew that these misleading reports were sent to Ocala Funding investors and other third parties.  
   Allen also admitted in court that he kept the chairman of TBW informed of the collateral shortfall, and that in the fall of 2008, Allen was told that the hole had been moved from Ocala Funding to Colonial Bank. At the time that TBW ceased operations, the hole was approximately $1.5 billion. According to court documents, as a result of the Ocala Funding fraud scheme, Freddie Mac, Colonial Bank and Ocala Funding investors believed they had an undivided ownership interest in thousands of the same mortgage loans.
   Court records state that in March 2009, Allen was directed to approach a private equity investor to secure capital to meet a $300 million private capital requirement the U.S. Department of Treasury set for Colonial Bank to receive $553 million from the Troubled Assets Relief Program (TARP).  Although Allen failed to secure the funding from the investor, he admitted in court that the TBW chairman represented to others that the investor was a $50 million participant and that the chairman diverted $5 million from Ocala Funding to an escrow account in the investor’s name.  This deception caused Colonial Bank to falsely announce publicly it had met its $300 million capital raise contingency and to send a letter to the FDIC that all investors had met a 10 percent escrow deposit requirement. Colonial Bank never received any TARP funds.
   In court April 1, Allen also admitted to making false statements in a letter he sent to the U.S. Department of Housing and Urban Development, through Ginnie Mae, regarding TBW’s audited financial statements for the fiscal year ending on March 31, 2009.  In this letter, Allen omitted that the delay in submitting the financial data was attributed to concerns its independent auditor had raised about the financing relationship between TBW and Colonial Bank.  Instead, Allen falsely attributed the delay to a new acquisition and TBW’s switch to a compressed 11-month fiscal year.
   To date, five other individuals have pleaded guilty for their roles in this and related fraud schemes.  
   The case is being prosecuted by Deputy Chief Patrick Stokes and Trial Attorney Robert Zink of the Criminal Division’s Fraud Section and Assistant U.S. Attorneys Charles Connolly and Paul Nathanson of the Eastern District of Virginia.  It was investigated by SIGTARP, FBI’s Washington Field Office, FDIC-OIG, HUD-OIG, FHFA-OIG and the IRS Criminal Investigation. The Financial Crimes Enforcement Network (FinCEN) of the Department of the Treasury also provided support in the investigation.   
   The guilty plea was announced by Assistant Attorney General Lanny A. Breuer of the Criminal Division; U.S. Attorney Neil H. MacBride for the Eastern District of Virginia; Acting Special Inspector General Christy Romero for the Troubled Asset Relief Program (SIGTARP); Assistant Director in Charge James W. McJunkin of the FBI’s Washington Field Office; Michael P. Stephens, Inspector General of the Department of Housing and Urban Development (HUD-OIG); Jon T. Rymer, Inspector General of the Federal Deposit Insurance Corporation (FDIC-OIG); Steve A. Linick, Inspector General of the Federal Housing Finance Agency (FHFA-OIG); and Victor F. O. Song, Chief of the Internal Revenue Service (IRS) Criminal Investigation.
   Source: U.S. Department of Justice (4/1/11)