INVESTIGATIONS

SIGTARP, through its own investigative resources and through partnerships with other relevant law enforcement agencies, is committed to robust criminal and civil enforcement against those, whether inside or outside of Government, who waste, steal or abuse TARP funds. SIGTARP has rapidly developed into a sophisticated white-collar law enforcement agency and as of March 31, 2010, SIGTARP has 84 ongoing criminal and civil investigations. These investigations concern suspected TARP fraud, accounting fraud, securities fraud, insider trading, bank fraud, mortgage fraud, mortgage servicer misconduct, fraudulent advance-fee schemes, public corruption, false statements, obstruction of justice, theft of trade secrets, money laundering, and tax-related investigations.

SIGTARP Hotline

Investigative cases

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• The Park Avenue Bank - On March 15, 2010, Charles Antonucci, the former President and Chief Executive Officer of The Park Avenue Bank, was charged by the United States Attorney’s Office for the Southern District of New York with offenses including self-dealing, bank bribery, embezzlement of bank funds, and bank, mail, and wire fraud, among others. In particular, Antonucci allegedly attempted to steal $11 million of TARP funds by, among other things, making fraudulent claims about the bank’s capital position. These charges mark the first time an individual has been criminally charged with attempting to steal TARP funds.

  According to the allegation, Antonucci falsely represented that he had personally invested $6.5 million in The Park Avenue Bank to improve its capital position. As set forth in the charges, however, the funds were actually borrowed from The Park Avenue Bank itself and reinvested as part of an undisclosed “round-trip” transaction. The complaint further alleges that this fraudulent transaction was touted by The Park Avenue Bank in its application for TARP funds as evidence of its supposedly improving capital position, a key factor regulators consider when awarding TARP funds. In addition, Antonucci allegedly made false representations to bank regulators about the source of the $6.5 million. The ongoing SIGTARP investigation is being conducted in partnership with U.S. Immigration and Customs Enforcement (“ICE”), the Superintendent of the Banks of New York, the Federal Bureau of Investigation (“FBI”), and the Office of the Inspector General of the Federal Deposit Insurance Corporation (“FDIC OIG”).

  Antonucci Arrest Press Release:
  
http://www.justice.gov/usao/nys/pressreleases/March10/antonuccicharlesarrestpr.pdf

Antonucci Criminal Complaint [PDF]



• Bank of America - On February 4, 2010, the New York Attorney General charged Bank of America Corporation (“Bank of America”), its former Chief Executive Officer Kenneth D. Lewis, and its former Chief Financial Officer Joseph L. Price with civil securities fraud. According to the allegations, in order to complete a merger between Bank of America and Merrill Lynch & Co., Inc. (“Merrill Lynch”), the defendants failed to disclose to shareholders spiraling losses at Merrill Lynch. Additionally, after the merger was approved, it is alleged that Bank of America made misrepresentations to the Federal Government in order to obtain tens of billions of dollars in TARP funds. The investigation was conducted jointly by the New York Attorney General’s Office and SIGTARP, and the case remains pending in New York state court. SIGTARP also assisted the Securities and Exchange Commission (“SEC”) with its Bank of America investigation. On February 22, 2010, the Honorable Jed S. Rakoff, United States District Judge for the Southern District of New York, approved a $150 million civil settlement between the SEC and Bank of America to settle all outstanding SEC actions against the firm. The court found that Bank of America failed to disclose adequately to its shareholders, prior to their approval of a merger with Merrill Lynch, the extent of additional material losses that Merrill Lynch had suffered. Additionally, the court found that the proxy statement sent to shareholders in November 2008 failed to disclose adequately Bank of America’s agreement to allow the payment of bonuses to Merrill Lynch employees prior to the merger. In addition to the $150 million payment, Bank of America also agreed to the following settlement requirements:

  • engaging an independent auditor to assess and report on the effectiveness of the company’s disclosure controls and procedures.
  • furnishing management certifications signed by the chief executive officer and chief financial officer with respect to proxy statements.
  • retaining disclosure counsel to the audit committee of the company’s board of directors.
  • adopting independence requirements beyond those already applicable for all members of the compensation committee of the company’s board of directors.
  • retaining an independent compensation consultant to the compensation committee.
  • implementing and disclosing written incentive compensation principles on the company’s website and providing the company’s shareholders with an advisory vote concerning any proposed changes to such principles.
  • providing the company’s shareholders with an annual “say on pay” advisory vote regarding the compensation of executives.
  
  
BofA Complaint [PDF]

BofA Press Release:
http://www.ag.ny.gov/media_center/2010/feb/feb04a_10.html


• Omni National Bank - Omni National Bank (“Omni”) was a national bank headquartered in Atlanta with branch offices in seven states. Omni failed and was taken over by the Federal Deposit Insurance Corporation (“FDIC”) on March 27, 2009. Before its failure, Omni had applied for, but did not receive, TARP funds under the Capital Purchase Program (“CPP”). SIGTARP has participated in several investigations concerning Omni that have led to criminal charges as part of a mortgage fraud task force that includes SIGTARP, the U.S. Attorney’s Office for the Northern District of Georgia, FDIC OIG, the Office of the Inspector General of the Department of Housing and Urban Development (“HUD OIG”), the U.S. Postal Inspection Service (“USPIS”), and the FBI. On January 14, 2010, Jeffrey Levine, Omni’s former Executive Vice President, pled guilty in Federal district court to charges of causing material overvaluations of bank assets in the books, reports, and statements of Omni. On March 23, 2010, Brent Merriell pled guilty in Federal district court to charges of making false statements to the FDIC and six counts of aggravated identity theft in connection with a scheme to prompt Omni to forgive $2.2 million in loans. Delroy Davy pled guilty on May 11, 2009, in Federal district court to charges of bank fraud and conspiracy. On April 1, 2010, Mark Anthony McBride was sentenced to 16 years in prison on charges of conspiracy to commit bank, mail, wire, and bankruptcy fraud. SIGTARP’s involvement in the investigations, including whether the various frauds had an impact on Omni’s CPP application, is ongoing.
  Levine Plea Press Release:
  
http://www.justice.gov/usao/gan/press/2010/01-14-10c.pdf

Merriell Plea Press Release:
http://www.justice.gov/usao/gan/press/2010/03-23-10.pdf

McBride Sentencing Press Release:
http://www.justice.gov/usao/gan/press/2010/04-01-10.pdf


• Mount Vernon Money Center - On March 11, 2010, the U.S. Attorney’s Office for the Southern District of New York indicted Robert Egan, president, and Bernard McGarry, chief operating officer, of the Mount Vernon Money Center (“MVMC”) with bank fraud for allegedly stealing $50 million entrusted to their company. MVMC engaged in various cash management businesses, including replenishing cash in more than 5,300 automated teller machines owned by banks and other financial institutions. According to the charges, from 2005 through February 2010, Egan and McGarry solicited and collected hundreds of millions of dollars from MVMC’s clients on the false representations that they would not commingle clients’ funds or use the money for purposes other than those specified in the various contracts with their clients. Egan and McGarry misappropriated their clients’ money — including the funds of several institutions in which the American taxpayer was an investor through TARP — to fund tens of millions of dollars in operating losses in MVMC’s businesses, to repay outstanding client obligations, and to enrich themselves at their clients’ expense. SIGTARP agents assisted with the investigation.
  Egan/McGarry Indictment Press Release:
  
http://newyork.fbi.gov/dojpressrel/pressrel10/nyfo031010.htm



• Nations Housing Modification Center - On March 19, 2010, Glenn Steven Rosofsky was arrested by agents from SIGTARP and the Internal Revenue Service, Criminal Investigation Division (“IRS-CI”) and charged by the U.S. Attorney’s Office for the Southern District of California with one count of conspiracy to commit wire fraud and money laundering and one count of money laundering. A separate information the same day charged Michael Trap with conspiracy to commit fraud and money laundering. As set forth in the charges, Rosofsky, Trap, and others operated a telemarketing firm, ostensibly to provide delinquent homeowners with loan modification services. Operating under the names “Nations Housing Modification Center” and “Federal Housing Modification Department,” Rosofsky and Trap took advantage of the publicity surrounding the Administration’s mortgage modification efforts under the TARP-supported Making Home Affordable (“MHA”) program and are alleged to have used fraudulent statements to induce customers to pay $2,500 - $3,000 each to purchase loan modification services that were not actually provided. The charges allege that the solicitation letters were mailed in envelopes that deceptively bore a Capitol Hill return address (in fact, it was merely a post office box) and were designed to mimic official Federal correspondence. It is alleged in court documents that the fraud grossed more than $1 million. Trap and Rosofsky have both pled guilty.

  The criminal charges follow the September 16, 2009, civil injunction obtained by the Federal Trade Commission (“FTC”), in connection with an investigation conducted in partnership with SIGTARP, against Rosofsky, Trap, and others, alleging violations of the FTC Act and telemarketing sales rules through misrepresentations about their organization as a Federal Government agency or affiliate and false claims that they would obtain mortgage modifications for consumers for a fee.
  
  

Rosofsky Superseding Information [PDF]

Rosofsky Plea Press Release:
http://www.justice.gov/usao/cas/press/cas10-0601-Rosofsky.pdf


• United Law Group - On March 11, 2010, SIGTARP, along with the USPIS, FBI, ICE, and the Orange County District Attorney’s Office, executed a publicly filed search warrant obtained by the U.S. Attorney for the Central District of California at the offices of United Law Group, LLC (“ULG”) in Irvine, California. This investigation focuses on allegations that ULG, taking advantage of the climate created by the TARP-supported MHA programs, engaged in a mortgage modification advance fee scheme. The company allegedly charged struggling homeowners fees ranging from $1,500 to $12,000 without performing services while advising victims to stop paying their mortgages and terminate contact with their lenders. Many ULG customers subsequently lost their homes to foreclosure.
  
  
• ProTrust Management, Inc. - On August 6, 2009, Gordon B. Grigg, a financial advisor and owner of ProTrust Management, Inc., formerly based in Franklin, Tennessee, was sentenced to serve a 10-year prison term after pleading guilty to four counts of mail fraud and four counts of wire fraud in the U.S. District Court for the Middle District of Tennessee. The charges stemmed from Grigg’s role in embezzling nearly $11 million from his investor clients through false statements, including claims that Grigg was making investments in fictional “TARP-guaranteed debt.” SIGTARP participated in the investigation of Grigg and supported the prosecution along with its law enforcement partners, the Securities and Exchange Commission (“SEC”), the Federal Bureau of Investigation (“FBI”), USPIS, the Tennessee Department of Commerce and Insurance, and the Franklin, Tennessee, Police Department. The prosecution was handled by the United States Attorney’s Office for the Middle District of Tennessee.
  
  
Grigg Sentencing Press Release:
http://www.justice.gov/usao/tnm/press_releases/2009/8_6_09.html


• Taylor, Bean & Whitaker Mortgage Corporation and Colonial Bancgroup - On June 15, 2010, Lee Bentley Farkas, the former chairman of Taylor Bean & Whitaker Mortgage Corporation (TBW) was arrested by SIGTARP agents and others and charged in the Eastern District of Virginia with offenses including bank fraud, wire fraud, and securities fraud. Farkas and his co-conspirators at both TBW and Colonial Bank allegedly committed a massive multi-billion dollar accounting fraud that included an attempt to fraudulently acquire more than $550 million in TARP funds for Colonial Bank. SIGTARP was joined in this investigation by the FBI, the Office of Inspector General of the Department of Housing and Urban Development (“HUD OIG”), and the FDIC Office of Inspector General (“FDIC OIG”). Colonial Bank, which had received conditional approval for TARP funding, received no funds following SIGTARP's notification to Treasury of this investigation. This investigation is ongoing.
  
  

Farkas TARP Indictment [PDF]

Farkas Arrest Press Release [PDF]

SEC Press Release [PDF]

• American Home Recovery - On June 17, 2010 Jaime Cassuto, David Cassuto, and Isaak Khafizov were charged in a Complaint with one count of conspiracy to commit mail and wire fraud in connection with a mortgage modification scam. They were subsequently arrested by SIGTARP Special Agents. The defendants were principals of American Home Recovery("AHR"), a mortgage modification company located in New York City. The Complaint alleges that at the direction of the defendants, salespeople employed by AHR sent unsolicited letters and emails to homeowners who were having difficulty making their mortgage payments, offering AHR's assistance in securing loan modifications. For a fee, AHR offered to renegotiate the terms of the homeowners' mortgages, and obtain more favorable interest rates. AHR boasted a 98 percent success rate in loan modifications, and promised homeowners their money back if AHR was unable to successfully renegotiate the homeowners' mortgages. After collecting thousands of dollars in fees, AHR in fact did virtually nothing to renegotiate the homeowners' mortgages. In some cases, AHR did not even contact the homeowners' banks concerning the subject mortgages. Nor did AHR refund the fees as promised, but instead retained them for its own benefit. In June 2009, AHR transferred all of its unfulfilled mortgage modification orders -- hundreds of them -- to another individual, and told that individual that he could attempt to collect additional fees from the homeowners. In this way, the defendants and AHR defrauded over 240 homeowners out of approximately $500,000 in fees. This case is a part of the Department of Justice’s nationwide “Operation Stolen Dreams” initiative.
  
  
Nationwide Mortgage Fraud Sweep Press Release [PDF]


• Supporting FTC’s Action Enjoining Improper Use of “MakingHomeAffordable.gov” - On May 15, 2009, at the request of the Federal Trade Commission (“FTC”), a Federal district court issued an order to stop an Internet-based operation that pretended to operate “MakingHomeAffordable.gov,” the official website of the Federal MHA program for mortgage loan assistance. The FTC alleged that the defendants deceptively diverted consumers who searched online for the free Government assistance program to commercial websites that offer loan modification services for a fee. According to the FTC’s complaint, these commercial websites, which are not part of or affiliated with the U.S. Government, require consumers to enter personally identifying and confidential financial information. The operators of these websites either purport to offer loan modification services themselves or sell the personally identifying information to others.
  Press Release:
  
http://www.ftc.gov/opa/2009/05/mortgageads.shtm

Additional Investigations Division Activities

• Rescue Fraud Working Group of the President's Financial Fraud Enforcement Task Force ("FFETF") - SIGTARP co-chairs the Rescue Fraud Working Group of the FFETF. President Obama established the FFETF "to investigate and prosecute significant financial crimes and other violations relating to the current financial crisis and economic recovery efforts, recover the proceeds of such crimes and violations, and ensure just and effective punishment of those who perpetrate financial crimes and violations."
  
  

• TALF-PPIP Task Force - SIGTARP has organized a multi-agency task force to deter, detect, and investigate any instances of fraud or abuse in the TALF or PPIP programs. The Task Force is comprised of both civil and criminal law enforcement agencies, with both investigative and analytical resources. The members of the TALF-PPIP Task Force combine their shared expertise in securities fraud investigations and maximize their resources to deter potential criminals, to identify and stop fraud schemes before they can fully develop, and to bring to justice those who seek to commit fraud through TALF or PPIP.

  In addition to STIGTARP, the TALF-PPIP Task Force consists of the Inspector General of the Board of Governors of the Federal Reserve System, FBI, Treasury’s Financial Crimes Enforcement Network (“FinCEN”), U.S. Immigration and Customs Enforcement (“ICE”), Internal Revenue Service Criminal Investigation Division (“IRS-CI”), SEC, and the USPIS.
  
  
TALF Task Force Announcement:
http://www.sigtarp.gov/press/2009/TALF_Task_Force_Announcement.pdf

TALF-PPIP Task Force Announcement:
http://www.sigtarp.gov/press/2009/TALF_Task_Force_Expanded_to_Include_PPIP.pdf

Last updated: Thursday, 08-Jul-2010 08:38:13 EDT