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Category Archives: 43A Fraudulent Schemes Pre-Charge Victories

State v. Ms. G (DMC 12809) – Felony Benefits Fraud ($8,500 Misappropriated from SNAP), Felony Fraudulent Schemes and Felony Theft – Not Charged – Arizona Department of Economic Security Investigated.

Ms. G was receiving food stamps through the Supplemental Nutrition Assistance Program (SNAP) on and off for about three years. In her application, she stated she had only between $1000 to $10,000 in savings. In reality, she had a 529 college savings account for her daughter which contained $87,000. She also had a UTMA account for her daughter in the amount of $105,000, and a Roth IRA for her children at $34,000. On top of that, she had a traditional IRA for $132,000, and a mutual fund account for herself which was valued at $150,000.

As she began going through divorce proceedings, she realized that the food stamps issue could become a criminal issue. She updated all of her income on the DES website and she ceased using food stamps. However, the DES saw the change on their website and began investigating her regarding the discrepancies. We then became involved and spoke with a DES Supervisor. During the course of speaking with the Supervisor, we indicated that her true income was basically zero when she started going through her divorce proceedings. We also pointed out that many of these accounts were retirement accounts, college payment accounts, or accounts in her children’s name, and not her name. The supervisor agreed with us and indicated that since she is no longer seeking supplemental nutritional assistance, that they would not view the past use of food stamps as a Benefits Fraud. No charges were ever brought against Ms. G. If they were, it could have seriously affected her ongoing custody battle in her divorce case.

State v. Ms. R (DMC No. 14569) – Felony Embezzlement ($50,000 Misappropriated from Interior Design Business), Felony Fraudulent Schemes, Felony Theft, Felony Identify Theft, Felony Forgery and Felony Obtaining a Credit Card by Fraudulent Means – Not Charged – Phoenix Police Department Investigated (DR No. 20XX-XXXXXXX3).

Ms. R was employed as a bookkeeper/personal assistant to the owner of an interior design business. She had access to all information regarding the business, and access to the checking accounts in order to pay business expenses. She was accused of using 3 different bank accounts and obtaining 5 different credit cards fraudulently by assuming the identity of the owner. Over the course of three years, she allegedly embezzled over $50,000.

We were brought into the case and we began defending Ms. R. We contacted the interior design business owner’s husband who was a licensed attorney in Arizona. We were able to demonstrate that some of the credit cards obtained were actually in our client’s name, and those were used actually to pay business expenses. The itemized business expenses on the credit card were then paid by company check. What became problematic was demonstrating other credit cards taken out in the owner’s name had a forged signature on the application in violation of ARS 13-2102. The owners ultimately filed a police report with the City of Phoenix. We had always contended that this was actually a civil matter, and not a criminal matter, and ultimately the Phoenix Police Department did not forward the case onto the County Attorney’s Office for charging. No criminal charges were ever brought against Ms. R. If they had been, and if she were convicted of all charges, she would have faced well over a decade in prison. As it finalized, no criminal charges were ever brought against Ms. R and she has no criminal record.

State v. Mr. M (DMC No. 15188) – Felony Fraudulent Schemes ($72,500), Felony Vulnerable Adult Abuse and Felony Theft – Not Charged – Adult Protective Services Investigated (Case No. 31XXXX).

Mr. M had a website building and SEO (Search Engine Optimization) company who would reach out to various website owners in order to sell them their services. The purpose was to improve their websites’ rankings and increase the actual organic traffic to the websites. Mr. M made contact with Bruce (a former lawyer) who was 79-years old. Bruce had a law website, but had a dream of building a directory website that was similar to “Angie’s List” for businesses. He was ultimately quoted a flat fee of $15,000 and he signed a contract.

Throughout the building of the site, he was repeatedly asked for more money and ultimately paid $72,500. The purpose of the site was changed from a directory to a site that would help people improve their credit scores. That particular site actually ended up generating approximately $30,000 in revenue to Bruce.

As Bruce was now in his eighties, his daughters sought to get a conservatorship and claim that he was suffering from dementia. They made a claim with Adult Protective Services that Mr. M had Taken Advantage of a Vulnerable adult in the amount of $72,500.

We became involved with the case and we contacted the Investigator for Adult Protective Services. We were able to show all the work performed on multiple sites, along with the change in direction of the site’s purpose, would justify the full $72,500. During this time, Bruce’s daughter sought to get a civil lawyer involved to potentially file a lawsuit. We also dealt with the civil lawyer and no civil complaint was ever filed. In addition, Adult Protective Services declined to seek any prosecution and they relayed the “turn down” of prosecution by the Arizona Attorney General’s Office to us. Mr. M was originally facing very serious felony charges which could have placed him in prison. Now, he has no criminal record whatsoever.

State v. Mr. K (DMC No. 14801) – Felony Embezzlement ($109,000 Misappropriated from a Non-Profit Educational Foundation), Felony Fraudulent Schemes and Felony Theft – Not Charged – Educational Foundation Investigated.

Mr. K secured his position as a Treasurer of an Arizona non-profit educational foundation. He informed them that he was a CPA, when in reality he had passed the CPA exam, but he did not have enough hours to actually receive his certification. In order to secure the position, he also informed them that he would be donating the office rent payment at approximately $1,000 a month while in that position. Again, in reality he was taking funds from the foundation’s checking account to pay those rent payments.

He held the position as Treasurer for 13 years. During that time, he misappropriated approximately $109,000 for both the office rent, and for his personal expenses. The Director, President/CEO and the Secretary began asking questions about the books being “sloppy.” Mr. K then secured our services in order to help him from being charged with any criminal activity. We contacted the Foundation and presented an accounting that showed much of the benefit was the rent paid for the Foundation’s offices. In other words, they were not actually out the benefit of the money used to pay the rent. We also showed that Mr. K’s elderly wife had various medical problems and dementia, and this placed a heavy mental toll on him. Ultimately, we were able to secure an agreement which would allow Mr. K to make a $30,000 payment over time, and no criminal charges would be sought against him. Originally, he was facing mandatory prison time due the amount of loss being above $100,000.

State v. Mr. E (DMC No. 14732) – Felony Fraudulent Schemes ($180,000 in Reversed Credit Card Charges) and Felony Theft – Not Charged – Tolleson Police Department and FBI Investigated.

Mr. E owned a waste solutions company and he acted as a waste broker working primarily in the state of Arizona however, he did some work in California, Texas and Colorado. As a broker of trash services, he was in the front load commercial service and roll off container business. He also placed portable toilets, fencing and storage containers for many fencing projects.

As a broker, he developed a close working relationship with a large international waste disposal company that he used as his primary hauling company. During a course of normal business, he used the following process: he would call or email in his request to customer service and they would charge a Visa debit card they had on file. The type of service requested was based on pre-determined and negotiated prices. When he placed the order, the large waste disposal company would charge his card and send him a purchase confirmation sheet receipt so that he would know that they received his order for the requested work, and that they were paid for the haul to the jobsites. This process was in place for an average of 50 times a month. Occasionally, he would receive invoices and he would call to see if they were actually paid or if he had open balances, and he was always told that they were paid in full. Lastly, as to the portable toilet service, he was billed every 28 days and the customer service representative of the large waste disposal company would simply run his credit card again and send him a receipt after it was completed.

Ultimately, Mr. E received a threatening phone call from one of the managers at the large waste disposal company claiming Mr. E had reversed charges for an amount of $180,000 over the past several years. He strongly disputed this and he was told by the company that they had contacted the Tolleson Police Department, and T.P.D. was referring the matter over to the FBI. We then became involved and immediately contacted the waste disposal company’s Attorney in order to get detailed spreadsheets of all charges and reversed charges. The company could not show that Mr. E had any knowledge of charges being reversed. In addition, it was questionable why it took years for the waste disposal company to see that charges had been reversed. Ultimately, the case appeared to be one of sloppy accounting practices. Civil resolution was reached in which $80,000 of the $180,000 disputed amount was paid in order to settle the case. Ultimately, no charges were brought against Mr. E for Fraudulent Schemes or Theft. If they had, he would have been facing a mandatory prison sentence if convicted due to the amount in question being above $100,000.

State v. Mr. D (DMC No. 15136) – Felony Fraudulent Schemes ($350,000 Misappropriated Wire Transfer), Federal Felony Bank and Wire Fraud, Felony Theft, Felony Vulnerable Adult Abuse and Felony Unlawful Use of Power of Attorney – Not Charged – Mesa Police Department Investigated (DR No. 20XX-XXXXXX3) and  CFA Institute Investigated.

Mr. D was a financial planner. His mother went in for surgery and passed away. After that, his father (actually his grandfather that adopted him when he was a child) asked for help with his financial affairs because he was getting older and more forgetful. They then met with an Attorney and signed a Power of Attorney. This gave Mr. D access to a joint account with his father.

At some point, Mr. D wired $350,000 into his own account which he used to pay off his own mortgage. Also, funds were used to pay off about $80,000 on a Discover card. That $80,000 was later clawed back by his father. Lastly, he took a $124,000 payment to himself.  The balance was then used to purchase a third condominium for his father’s trust. Mr. D also transferred two other condominiums into the trust, which resulted in a net positive of $65,000 to his father. Because everything totaled positive for his father’s trust, he assumed that he had done nothing wrong. However, he was contacted by Mesa Police and the CFA Institute regarding various improprieties. Mesa Police were looking into Felony charges of Fraud Schemes, Unlawful Use of a Power of Attorney, Theft, and Vulnerable Adult Abuse. There was also a potential for a Felony Federal Bank and Wire Fraud claim due to the use of the wire transfer to a federal banking institution.

We became involved and we were able to shut down the investigation and keep it purely as a civil matter.  Through the course of the civil lawsuit, a proposal was made to have Mr. D. repay his father $400,000, in exchange for merely keeping  all three condominiums. Ultimately, the case resolved civilly and there were no criminal charges ever brought against Mr. D. Originally, Mr. D was facing mandatory prison time due to the fact that the amount of loss was above $100,000.

State v. Mr. G (DMC No. 14590) – Felony Embezzlement ($471,640), Felony Mortgage Fraud and Felony Fraudulent Schemes – Not Charged – Enforcement and Compliance Division of the Arizona Department of Real Estate Investigated (File No. XXF-DI-XXX-REL).

Mr. G owned a global investment company and he was issued a real estate license through the Arizona Department of Real Estate. Later, he was also issued a broker’s license and a salesperson license. The Department of Real Estate conducted an onsite audit of Mr. G’s books and they found varying discrepancies.

His employees were negligent in the performing acts, which required a license, and they did not exercise supervision over the company. Specifically, property management duties were not properly handled. At one point, a property management agreement which was utilized by Mr. G which did not contain a clause stating that the PMA cannot be assigned to another licensee, or licensed entity, without the expressed written consent of the property owner as required by A.R.S. 32-2173(A) (1) (j).

The main issue was that the property management trust agreement, journals and client ledgers were not in balance with each other. This is required by A.R.S. 32-2151(B) (2). The resulting shortage was an amount of $471,640. The Department of Real Estate alleged that Mr. G had opened a line of credit from Chase Bank for approximately $300,000. They alleged that he had done this by purchasing Certificates of Deposit with trust fund account money and used that as collateral to secure the line of credit. They then alleged that he later bought properties to use for himself, and not for the benefit of his clients. Ultimately, the Arizona Department of Real Estate filed a Cease and Desist Order and set the case for a Hearing in front of an Administrative Law Judge. In addition, civil lawsuits were filed against Mr. G.

We became involved at the request of Mr. G’s civil counsel in order to prevent criminal charges from being filed. We were able to show that the entire amount of money that was supposedly missing was actually still deposited with the bank in various CDs. We were also able to show prior email communications with somebody in the Department of Real Estate who indicated that securing a line of credit with the CDs was “okay”, since the money couldn’t be touched and was being held at the actual bank. Eventually, all of the clients were made whole, and after a Motion to Stay the civil proceedings was filed, the case resolved.

U.S. v. Ms. G (DMC No. 14158) – Federal Felony Mortgage Fraud ($1,100,000), Federal Felony Bank and Wire Fraud, Felony Fraudulent Schemes, and Felony Forgery – Not Charged – Large National Bank Investigated.

Ms. G and her husband were going to purchase a large house for approx. $1,000,000. The appraisal information was sent from the loan originator, and the loan originator specifically asked if any funds were going to be pulled from a retirement account, to which Ms. G and her husband said “no.” Ultimately, discrepancies were found in the closing documents, and in order to close on the house, Ms. G had the house purchased in her husband’s name only. This was accomplished through a Special Warranty Deed signed by the husband “as a married man as his sole and separate property.” Ms. G signed a Disclaimer Deed disclaiming any interest in the property. Also, they both signed a Warranty Deed conveying property from husband’s sole and separate property to husband and wife.

The potential problem was that the Disclaimer Deed signed by Ms. G indicated that none of her assets or community assets were used in the purchase of the home. This is not accurate as a joint check was used for the purchase. In addition, the intent was always to use community assets to buy the home. After the closing, the bank discovered discrepancies and began investigating. A potential concern was that Forgery was committed, along with allegations of Fraudulent Schemes, and Mortgage Fraud per Arizona Revised Statue 13-2320. Lastly, a  potential for Federal Bank and Wire Fraud was also possible due to the federal loan documents which were signed.

We were able to show although Ms. G did not sign the document indicating the property was purchased with separate funds of the spouse, that it must be read in conjunction with the other documents signed by Ms. G at the same time. Specifically, that Mr. G. received title through the Special Warranty Deed the day before the Disclaimer Deed, and that he signed the Warranty Deed at the same time as the Disclaimer Deed, thereby suggesting that they were meant to function together to promote the buyers’ intent (as outlined in both the purchase contract and the loan pre-qualification form).

We were able to show that none of the documents were indicative of any intent to defraud. The only real issue had to do with community property issues down the road should they become divorced. Initially, Ms. G was facing the potential of multiple years in prison, but we were able to convince the bank not to turn this into a criminal matter and get the authorities involved.

Ms. T ran an HOA Company which represented many housing developments. She was accused of Embezzling $35,000 from the HOA by transferring funds into a personal account and altering the books. She had 7 people working for her business at the time when she was contacted by a private law firm who indicated they would be seeking Criminal Charges.

Once the pre-charge team became involved with the case, we contacted the private law firm to begin negotiations. In the meantime, they filed a Verified Complaint claiming Damages for Embezzlement by way of Common Law Fraud, Breach of Contract, and Conversion. They had also previously sent a Letter of Demand for an immediate accounting. During negotiations, it was clear that they were going to seek Criminal Charges regarding Embezzlement, Fraud Schemes and Theft. They also indicated that if a Civil Settlement was reached, they would consider the matter to be Non-Criminal and it would be concluded and Ms. T’s involvement would be deemed as poor accounting practices. Ultimately, we reached a Settlement Agreement of a payment of $35,000, and the matter was treated as a Civil Incident versus a Criminal Complaint. No charges were brought against Ms. T.

NOT CHARGED | FEDERAL SECURITIES FRAUD/RICO/MONEY LAUNDERING/ BANK and WIRE FRAUD ($636,000) NOT CHARGED due to CIVIL SETTLEMENT – U.S. v. Mr. N. (DMC No. 7596) (FBI Investigated): Mr. N. owned a company which bought investments, fixed income investments, CD’s and bonds from banks and then sold them to various brokers.  Mr. N. was accused of diverting approximately $600,000 of client’s money into a separate account in order to fund a separate business.  We were able to explain to investigators that this was a “civil” issue, and not a criminal issue.  We also resolved a civil law suit filed by a large investor, by making sure that all monies were returned to proper accounts.  Mr. N. had been facing a large amount of prison time, along with the loss of his Securities licenses until we got involved.  Ultimately, all law suits were dropped, no charges were brought against Mr. N. and his licenses were left intact.

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