OPERATORS OF ONLINE BUSINESS INDICTED IN TAX AND BANK FRAUD CASE

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, March 4, 2016

North Carolina Couple Indicted for Tax Fraud and Bank Fraud Related to Their Online Business

A federal grand jury in the Middle District of North Carolina returned an indictment March 1 charging a Greensboro, North Carolina couple, who operated an online sales business with tax fraud as well as bank and wire fraud, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U.S. Attorney Ripley Rand of the Middle District of North Carolina. The defendants were arrested earlier today and had their initial court appearances this afternoon.

Daniel Balson and Renee Balson were charged with one count of conspiracy to defraud the United States and to commit bank fraud, one count of bank fraud and five counts of wire fraud.  Daniel Balson was additionally charged with three counts of filing false tax returns for 2009 through 2011 and Renee Balson was charged with one count of filing a false tax return for 2009.  

According to the indictment, Daniel Balson owned and operated Southern Sales Online (SSO), an online retail business that sold a variety of merchandise through eBay and Amazon, including scrapbooking and art materials, books, inspirational DVDs, pet supplies and tools.  It is alleged that although SSO earned more than $1 million in gross receipts during 2005 through 2011, the Balsons failed to report gross receipts for SSO on their tax returns filed with the Internal Revenue Service (IRS).  The Balsons also failed to report income from SSO on a bank application for a mortgage loan modification in 2011.  The indictment also alleges that the Balsons stole merchandise from LifeWay Christian Stores and Hobby Lobby and then knowingly sold the stolen merchandise through SSO at prices less than retail value.

If convicted, Daniel Balson and Renee Balson each face a statutory maximum sentence of five years in prison for the conspiracy count, 30 years in prison for the bank fraud count, 20 years in prison for each wire fraud count and three years in prison for each false tax return count.  The Balsons also face substantial monetary penalties and restitution.

An indictment is not a finding of guilt.  An individual charged by indictment is presumed innocent unless and until proven guilty at some later criminal proceeding.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Rand commended special agents of IRS-Criminal Investigation, who investigated the case, and Assistant Chief Todd A. Ellinwood and Trial Attorney Mara Strier of the Tax Division, who are prosecuting the case.  Acting Assistant Attorney General Ciraolo also thanked the U.S. Attorney’s Office of the Middle District of North Carolina for their assistance.

BANKER SENT TO PRISON FOR ROLE IN FRAUD CASE INVOLVING TARP MONEY

FROM:  U.S. JUSTICE DEPARTMENT 

Thursday, February 25, 2016

Former President and CEO of Georgia-Based Bank Sentenced to 84 Months in Prison for Role in Bank Fraud Conspiracy

A former president and CEO of a Georgia-based bank was sentenced today to 84 months in prison for his role in a conspiracy to commit bank fraud and major fraud against the United States.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting U.S. Attorney G.F. Peterman III of the Middle District of Georgia made the announcement.

Gary Patton Hall Jr., 50, of Tifton, Georgia, was sentenced by Senior U.S. District Judge Hugh Lawson of the Middle District of Georgia.  In addition to imposing the prison term, Judge Lawson ordered Hall to pay $3,931,018 in restitution to the bank and federal agencies for losses suffered.  In December 2015, Hall pleaded guilty to one count of conspiracy to commit bank fraud and one count of conspiracy to commit major fraud against the United States.

According to court documents, Hall was the president and CEO of Tifton Banking Company (TBC) from August 2005 until June 2010.  As part of his guilty plea, Hall admitted that he engaged in a scheme to mislead the bank and its loan committee about loans that TBC made to local individuals and businesses.  Hall hid past-due loans from the Federal Deposit Insurance Corporation (FDIC) and the TBC loan committee, which resulted in the bank continuing to approve and renew delinquent loans and loans for which the collateral was lacking, he admitted.   Several of the borrowers eventually defaulted on the loans, resulting in millions of dollars in losses to TBC and others.

At his plea hearing, Hall admitted that in certain transactions in which he exercised approval authority, he made false representations about the loans to TBC’s loan committee and hid his personal and business interests, including approving loans to the buyer of a condominium in Panama City Beach, Florida, owned by Hall himself.  Hall admitted that he hid the loans from the FDIC and state regulators when the buyer’s payments became delinquent, and that he received $50,000 profit from the sale of his condo.  The buyer eventually declared bankruptcy, resulting in a loss of more than $400,000 to TBC.

Hall also admitted to making fraudulent representations that led to commercial loan guarantees being issued by the U.S. Small Business Administration (SBA) and the U.S. Department of Agriculture (USDA) on two other loan transactions.  The loans were made by TBC and guaranteed by the government agencies to refinance earlier non-performing commercial loans made by TBC as part of the scheme to mislead bank regulators and hide the bank’s true financial condition.  Those guaranteed loans resulted in more than $2 million in losses to the bank and the agencies.

In November 2010, the Georgia Department of Banking and Finance closed TBC because of its poor financial condition.  At that time, TBC had not repaid the $3.8 million it received from the Department of Treasury’s Troubled Asset Relief Program (TARP).

The FBI, the Special Inspector General for TARP, the SBA’s Office of the Inspector General, the FDIC Office of the Inspector General, the USDA’s Office of Inspector General and the Tifton County Sheriff’s Office investigated the case.  Senior Trial Attorney N. Nathan Dimock of the Criminal Division’s Fraud Section and Assistant U.S. Attorney Robert McCullers of the Middle District of Georgia prosecuted the case.

2ND TRUCKING COMPANY EXECUTIVE SENTENCED FOR ROLE IN BANK FRAUD AND CONSPIRACY TO DEFRAUD U.S. GOVERNMENT

FROM:  U.S. JUSTICE DEPARTMENT 

Friday, October 16, 2015

Second Former Arrow Trucking Executive Sentenced in Multi-Million Dollar Fraud Scheme

A Waxahachi, Texas, resident and former chief financial officer (CFO) of Arrow Trucking Company was sentenced to serve 35 months in prison for conspiracy to commit bank fraud and to defraud the United States, announced Acting Assistant Attorney General Caroline D. Ciraolo of the Justice Department’s Tax Division and U. S. Attorney Danny C. Williams Sr. of the Northern District of Oklahoma.

Jonathan Leland Moore, 38, pleaded guilty on Dec. 4, 2014, to an information charging him with one count of a dual-object conspiracy to defraud the United States and to commit bank fraud.  Moore conspired with James Douglas Pielsticker, 47, a resident of Dallas, and former CEO and president of Arrow Trucking Company, to defraud the United States by failing to account for and pay federal withholding taxes on behalf of Arrow Trucking Company and by making payments to Pielsticker outside the payroll system.

Moore cooperated with the criminal investigation, including testifying on behalf of the government during Pielsticker’s sentencing hearing last week.  On Oct. 9, Pielsticker was sentenced to serve seven and one-half years in prison and ordered to pay $21,026,682.03 in restitution for his role in the conspiracy and for attempting to evade his individual income taxes.

Chief U.S. District Court Judge Gregory K. Frizzell of the Northern District of Oklahoma also sentenced Moore to serve three years of supervised release following his prison term and ordered him to pay $21,026,682.03 in restitution to the Internal Revenue Service (IRS) and the Transportation Alliance Bank (TAB).

According to the plea agreement and other court records, in 2009, Moore, Pielsticker and others withheld Arrow Trucking Company employees’ federal income tax withholdings, Medicare and social security taxes, but did not report or pay over these taxes to the IRS, despite knowing that they had a duty to do so.  The conspirators paid for Pielsticker’s personal expenses with money from Arrow Trucking Company and submitted fraudulent invoices to TAB to induce the bank to pay funds to Arrow Trucking Company that were not warranted.  In total, the conspiracy caused a loss to the United States totaling more than $9.562 million.

Acting Assistant Attorney General Ciraolo and U.S. Attorney Williams commended the special agents of the IRS-CI and FBI, who investigated this case, and Assistant U.S. Attorneys Jeffrey A. Gallant and Catherine Depew of the Northern District of Oklahoma and Special Assistant U.S. Attorney and Tax Division Trial Attorney Charles A. O’Reilly, who prosecuted the case on behalf of the United States.

ARMENIAN POWER LEADER RECEIVES 32 YEAR PRISON TERM FOR CRIMES

FROM:  U.S. JUSTICE DEPARTMENT

Wednesday, November 12, 2014

Armenian Power Leader Sentenced to 32 Years in Prison for Racketeering, Extortion and Fraud

A leader of the Armenian Power gang, who was convicted at trial of 57 counts for his role in a racketeering conspiracy that included extortion, bank fraud, and a sophisticated credit and debit card skimming scheme, was sentenced today to 32 years in prison.

Assistant Attorney General Leslie R. Caldwell of the Justice Department’s Criminal Division and Acting U.S. Attorney Stephanie Yonekura of the Central District of California made the announcement.

Mher Darbinyan, aka “Hollywood Mike” and “Capone,” 39, of Valencia, California, was sentenced by U.S. District Judge R. Gary Klausner of the Central District of California.

According to the evidence presented at trial, Darbinyan was a leader of Armenian Power, a gang responsible for extortion, firearms offenses, fraud, and identity theft throughout the Los Angeles-area.  Among other activities, Darbinyan operated a sophisticated bank fraud scheme that used middlemen and runners to deposit and cash hundreds of thousands of dollars in fraudulent checks drawn on the accounts of elderly bank customers and businesses.  Separately, Darbinyan also organized and operated a sophisticated debit card skimming operation targeting customers of 99 Cents Only Stores across Southern California.  This expansive scheme involved the installation and use of skimmers to steal thousands of customers’ debit card numbers and PIN codes.

Evidence at trial also showed that Darbinyan conspired to extort money from a member of the Armenian community by threatening violence against the victim and his family members.  On two separate occasions, Darbinyan also possessed firearms and ammunition after having previously been convicted of felony grand theft for his role in a 2004 debit card fraud scheme.

Darbinyan was among 90 individuals charged in 2011 in two indictments targeting Armenian Power.  To date, 87 individuals have been convicted.  Two defendants are fugitives, and prosecutors dismissed charges against one defendant.

According to evidence presented during the Armenian Power trials, the Armenian Power street gang formed in the East Hollywood district of Los Angeles in the 1980s.  The gang’s membership consisted primarily of individuals of Armenian descent, as well as of other countries within the former Soviet bloc.  Armenian Power has been designated under California state law as a criminal street gang and is believed to have more than 250 documented members, as well as hundreds of associates.  According to evidence presented during the Armenian Power trials, Armenian Power members and associates regularly carry out violent criminal acts, including murders, attempted murders, kidnappings, robberies, extortions, and witness intimidation to enrich its members and associates and preserve and enhance the power of the criminal enterprise.

The trial evidence also showed that Armenian Power leaders worked closely with powerful organized crime figures in Russia and Armenia, known as “thieves-in-law,” and members of the Mexican Mafia prison gang to commit criminal activities in the Los Angeles area and elsewhere.

These cases were investigated by the Eurasian Organized Crime Task Force, which is comprised of the FBI, Glendale Police Department, Los Angeles Police Department, Burbank Police Department, Los Angeles Sheriff’s Department, Internal Revenue Service – Criminal Investigation, U.S. Immigration and Customs Enforcement’s Homeland Security Investigations, and U.S. Secret Service.  The Huntington Beach Police Department and Beverly Hills Police Department provided assistance.

The cases are being prosecuted by Trial Attorney Andrew Creighton of the Criminal Division’s Organized Crime and Gang Section and Assistant U.S. Attorney Elizabeth Yang of the Central District of California.

MAN SENTENCED TO PRISON FOR MAKING FALSE STATEMENT TO BANK AND FILING FALSE TAX RETURN

FROM:  U.S. JUSTICE DEPARTMENT 
Friday, April 4, 2014

North Carolina Paving Contractor Sentenced to Prison for Tax and Bank Fraud
Tommy Edward Clack was sentenced today to serve 66 months in federal prison for tax and fraud crimes by U.S. District Judge Thomas D. Schroeder in Winston-Salem, N.C., the Justice Department and Internal Revenue Service (IRS) announced.  Clack was also ordered to pay $1,350,597 in restitution to the IRS and $20,945 in restitution to a bank he defrauded, and to serve five years of supervised release.  Clack previously pleaded guilty to one count of willfully filing a false federal income tax return for 2007 and one count of knowingly making a false statement to a federally insured bank in order to obtain a mortgage loan.

According to court documents, for approximately the past 10 years, Clack has been a traveling, self-employed paving contractor doing business in North Carolina, South Carolina, Maryland and Florida.  Clack operated under several different business names and changed the names frequently in order to avoid scrutiny by state and federal law enforcement agencies.  Over the years, Clack was charged with and convicted of multiple state criminal violations in Maryland, North Carolina, South Carolina and Florida as a result of his business practices.  Since June 2010, Clack has been under an injunction banning him from operating as a driveway paving contractor in North Carolina.  He is also subject to a cease-and-desist order in Maryland that bans him from various fraudulent practices.

According to court documents, Clack significantly underreported the income from his paving business on his tax returns.  From 2004 to 2007, Clack earned gross income of over $5.7 million, but reported only a fraction of it to the IRS.  In 2004, Clack underreported his income by approximately $294,829.  In 2005, he underreported his income by approximately $1,178,822.  In 2006, Clack underreported his income by approximately $1,868,556.  And in 2007, Clack underreported his income by $2,428,710.  Clack’s returns were prepared by a professional accountant, but Clack knowingly provided her with false information on which to base his returns, and he signed his returns knowing that they significantly understated his income.  Altogether, as a result of these false returns Clack underpaid his taxes by $1,350,597 for the 2004 through 2007 tax years.

According to court documents, Clack employed a number of strategies to conceal his tax fraud.  In addition to constantly changing the name of his paving company, Clack did not maintain books and records.  He also dealt extensively in cash, paid his employees in cash, and structured currency transactions with his bank in amounts designed to evade the bank’s requirement to file Currency Transaction Reports with the U.S. Treasury.

Court documents also state that in December 2003, Clack submitted a mortgage loan application in the name of his then-wife to a bank in Greensboro, N.C.  The application sought a $640,000 loan as financing for the purchase of a $1.2 million home.  As part of the loan application, Clack provided the bank with a tax return in his wife’s name for the year 2002 that claimed married filing separate status, reported adjusted gross income of $372,748 and claimed total tax liability of $127,745.  Clack claimed that this tax return had been filed with the IRS, when in fact Clack and his then-wife had filed a joint federal income tax return for 2002 that claimed that the couple had adjusted gross income of $17,656 and a total tax liability of $2,685.  The bank would not have approved the loan if they knew about the discrepancy.  Clack ultimately defaulted on the loan and the bank suffered a loss after foreclosing on the collateral.

The case was investigated by the IRS-Criminal Investigation, with assistance from the North Carolina State Bureau of Investigation.  It was prosecuted by Trial Attorney Jonathan Marx of the Tax Division with assistance from the U.S. Attorney’s Office for the Middle District of North Carolina.

FOUR CONVICTED IN LOS ANGELES FOR PARTICIPATION IN IDENTITY THEFT RING

The following excerpt is from the Department of Justice website:
Thursday, March 22, 2012
Armenian Power Member and Three Armenian Power Associates Convicted in Los Angeles for Roles in Identity Theft Ring
WASHINGTON – After a five week trial, four defendants have been convicted for their roles in one of the largest bank fraud and identity theft schemes in California history, with dozens of victims in four states and millions of dollars in losses.

The convictions were announced by Assistant Attorney General Lanny A. Breuer of the Justice Department’s Criminal Division, U.S. Attorney Andre Birotte Jr. of the Central District of California, Assistant Director in Charge of the FBI’s Los Angeles Field Office Steven Martinez and Special Agent in Charge of the U.S. Secret Service (USSS) Joseph Beaty.

Arman Sharopetrosian, Karen Markosian, Artush Margaryan and Kristine Ogandzhanyan were found guilty of conspiring to commit bank fraud, attempted bank fraud and various counts of aggravated identity theft.  Sharopetrosian, Markosian and Ogandzhanyan waived a jury trial and consented to trial by the judge, and Margaryan proceeded with a jury trial.

Yesterday, U.S. District Judge David O. Carter found Ogandzhanyan, 28, of Burbank, Calif., guilty of one count of bank fraud conspiracy, two counts of attempted bank fraud and four counts of aggravated identity theft.  On March 16, 2012, the judge found Sharopetrosian, 33, of Burbank, guilty of one count of bank fraud conspiracy, four counts of bank fraud and seven counts of aggravated identify theft.  On March 16, 2012, the judge also found Markosian, 39, of Glendale, Calif., guilty of one count of bank fraud conspiracy, one count of attempted bank fraud and two counts of aggravated identity theft.  A jury convicted the fourth defendant, Artush Margaryan, 28, of Van Nuys, Calif., on March 16, 2012, of one count of bank fraud conspiracy, one count of attempted bank fraud and three counts of aggravated identity theft.

Evidence was presented at trial that Sharopetrosian is a member of the Armenian Power organized crime group, and Margaryan, Markosian and Ogandzhanyan are Armenian Power associates.

According to evidence presented at trial, Sharopetrosian directed the massive fraud scheme along with co-defendant Angus Brown, while the two were incarcerated at Avenal State Prison.  Using cellular telephones that were smuggled into the prison, Sharopetrosian and Brown worked from behind bars to coordinate with others, including Ogandzhanyn, Markosian and Margaryan, to obtain confidential bank profile information and steal money from victim account holders.  Often targeting high-value bank accounts, the defendants used account holders’ personal identifying information – including names, Social Security numbers and dates of birth – to impersonate victims in phone calls to the bank.  The defendants gathered account information, transferred funds between victims’ accounts and placed unauthorized check orders for the accounts.  They then stole the checks, obtained the victims’ signatures from public documents and paid conspirators to cash the forged checks.  Over the course of the six-year conspiracy, the defendants and their co-conspirators caused more than $10 million dollars in losses to victims in Southern California, Nevada, Arizona and Texas.

“These defendants, including two individuals who were operating from a prison cell, perpetrated a massive fraudulent scheme on behalf of a dangerous criminal enterprise,” said Assistant Attorney General Breuer.  “As members and associates of Armenian Power, they stole sensitive personal and financial information from innocent consumers and caused millions of dollars in losses.  Whether organized criminal groups traffic in drugs, commit financial fraud or wreak other havoc to keep themselves going, they must be stopped.  We are doing everything possible to shut down dangerous gangs like Armenian Power.”

“The safety and sanctity of confidential financial information is paramount in today’s society,” said U.S. Attorney Birotte.  “Identity theft is a fundamental invasion of consumer privacy that cannot be tolerated.  These convictions demonstrate that violators, whoever and wherever they may be, will be caught and will be prosecuted to the fullest extent of the federal law.”

“The defendants were convicted in a trial that uncovered a sophisticated and lengthy scheme that targeted victims in multiple states, and included disturbing details, such as orders made from within prison walls and assistance from bank insiders enlisted by the defendants,” said FBI Assistant Director Martinez.  “This case is also indicative of the growing trend of gang or organized crime-affiliated groups now engaging in identity theft and other financial crimes in furtherance of their enterprise.”  

These defendants are four of 20 defendants who were charged with operating the bank fraud and identity theft scheme in one of a series of federal indictments unsealed on Feb. 16, 2011.  The indictments allege various federal crimes against members and associates of the Armenian Power criminal organization.  To date, 19 of the 20 defendants charged in the bank fraud indictment have been convicted, including Brown.  One defendant, Faye Bell, was arrested earlier this year and is still awaiting trial.

Sharopetrosian, Margaryan, Markosian and Ogandzhanyan face maximum sentences of 30 years in federal prison for each count of bank fraud, 30 years for each count of conspiracy to commit bank fraud and additional mandatory two year sentences for each count of aggravated identity theft.

 Sentencing for all four defendants is scheduled for Aug. 6, 2012, before Judge Carter.

The case is being prosecuted by Assistant U.S. Attorneys Martin Estrada and Joseph McNally of the Central District of California and Trial Attorney Cristina Moreno of the Organized Crime and Gang Section in the Justice Department’s Criminal Division.  The case was investigated by the Eurasian Organized Crime Task Force, which includes the FBI, the USSS, the Los Angeles Police Department, the Glendale Police Department, the Burbank Police Department, the Internal Revenue Service and the U.S. Immigration and Customs Enforcement.