Prolific Fraudster Sentenced to 40 Years

He was, in the words of the assistant U.S. attorney prosecuting him, a “financial predator.” And the federal judge he recently stood before called his long-term fraud crime spree “outrageous” and “despicable,” noting the more than 500 victims ensnared by his latest scheme.

The individual in question is Harris Dempsey “Butch” Ballow, a Texas man who had seemingly made a career out of separating people from their hard-earned money through various financial scams—starting back in the 1980s. But that career has finally come to end: The 75-year-old Ballow was sentenced in May to 40 years in prison after pleading guilty to defrauding investors in a Nevada company. He was also ordered to pay more than $37 million in restitution to those investors.

And according to FBI Houston Special Agent Kendall Hopper, who worked the case, what made this particular criminal scheme even worse was that Ballow had perpetrated it while he was a fugitive from justice hiding out in Mexico. “Ballow fled the United States in late 2004, right around the time he was scheduled to appear in court for sentencing on a previous federal conviction for fraud-related money laundering,” said Hopper, “but instead of keeping a low profile, he brazenly continued his criminal ways.”

In this most recent scheme that netted him the 40-year prison term, Ballow and co-conspirators were able to buy up the majority of the publicly traded shares of a Nevada company called E-SOL International Corporation and install fictitious people as company officers. At the time, E-SOL had almost no assets and conducted no business. Ballow then rebranded E-SOL as a holding company for a couple of phony businesses—of course controlled by him and his associates—and got to work soliciting investors.

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IRS scam callers are going to jail for up to 20 years

With stiff sentences for 21 conspirators last week in the United States and a round of indictments in India, the Justice Department says it has broken up what appeared to be the nation’s first large-scale, multinational telephone fraud operation.

Over four years, more than 15,000 victims in the United States lost “hundreds of millions” of dollars to the sophisticated scam, and more than 50,000 individuals had their personal information misused, the department said Friday. The money was routed through call centers in India back to the ringleaders in eight states.

The fraudulent calls came suddenly and frequently while the scam was active from 2012 to 2016, according to court documents. A person posing as an Internal Revenue Service or immigration official was on the phone, threatening arrest, deportation or other penalties if the victims did not immediately pay their debts with prepaid cards or wire transfers.

The calls targeted the most vulnerable Americans, including immigrants and older people.

An 85-year old woman in San Diego paid $12,300 to people claiming to be I.R.S. employees who threatened her with arrest for tax violations.

A Chicago man paid $5,070 after being threatened with arrest and deportation by supposed state police and immigration authorities, the indictment said.

The words “U.S. Government” showed up as the caller I.D. on a number from which a New Hampshire woman was told to pay the I.R.S. $3,980 in payment cards, the court papers said.

In the announcement on Friday, the department said 21 people living in eight states — Illinois, Arizona, Florida, California, Alabama, Indiana, New Jersey and Texas — were sentenced last week in Houston to prison for up to 20 years for their role in the scheme.

Two other conspirators in Illinois were sentenced in February to between two years to just over four years for conspiracy, and a third person in Arizona was given probation in a plea agreement, it said.

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Stealing from the Vulnerable

Those struggling to make ends meet sometimes rely on short-term, unsecured payday loans when they need quick cash.

Richard Moseley, Sr.—through his group of payday lending businesses known as the Hydra Lenders—preyed on these consumers’ financial vulnerability. His businesses scammed more than 600,000 Americans by charging them illegally high interest rates and even stealing their identities.

“A lot of these victims had to rebuild their financial lives. They had to shut down their bank accounts and open new ones. This was one of the only ways for victims to stop being defrauded,” said FBI New York Supervisory Special Agent Matthew Taylor, who oversaw the investigation. “Some of the individuals victimized were financially struggling at the time—including grandmothers, grandfathers, and former military members who served our country. In most cases, victims did not get the money back that was illegally taken from them.”

The FBI first learned about the Hydra Lenders when another government agency brought a consumer lawsuit against the group to the Bureau’s attention. Through traditional investigative techniques such as reviewing financial records, interviewing employees and victims, and collaborating with partner agencies, the FBI learned that Moseley’s enterprise routinely broke the law in issuing and collecting on loans.

From 2004 to 2014, the Hydra Lenders offered payday loans online to consumers across the country, even in states where payday lending was effectively outlawed. Some of the group’s illegal tactics included:

Charging illegally high interest rates of more than 700 percent

Using deceptive and misleading loan documentation

Taking additional, undisclosed fees from customers’ bank accounts

Withdrawing only the interest payment from the borrowers’ accounts and not applying any funds toward the principal, deepening their debt burden

Setting up payday loans for customers who had not agreed to them but had simply inquired about loan eligibility

As borrowers began to complain to state governments and consumer protection organizations, Moseley dodged regulators by insisting that his businesses were located overseas in Nevis and New Zealand and could not be regulated. In reality, the FBI’s investigation showed the enterprise operated entirely out of offices in Kansas City, Missouri, with all of its employees, bank accounts, and other aspects of the businesses located there. Moseley simply used fake letterhead and a mail forwarding service to give the appearance of an overseas location.

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Education Bait-and-Switch Scheme Cheated Veterans of Tuition Benefits

The GI Bill provides the country’s service members and veterans a free or reduced-cost college education to those who qualify, offering them a head start on their return to civilian life. But one group of fraudsters used the Post-9/11 GI Bill and other U.S. Department of Defense educational programs for veterans as a piggy bank to line their own pockets while cheating more than 2,500 service members out of an education they were entitled to under the law.

“This was straight up stealing. Stealing money for veterans that was supposed to help them advance their careers and make themselves more marketable to employers after coming out of the military,” said FBI Special Agent James Eagleeye, who investigated the case out of the FBI’s Newark Division along with investigators from the Department of Veterans Affairs (VA), the Department of Defense, and Department of Education.

The scheme was a basic bait-and-switch. A company called Ed4Mil worked with two schools: one, the private liberal arts Caldwell University in New Jersey; the other, an online correspondence school hired by Ed4Mil to develop and administer courses. Ed4Mil aggressively recruited service members and veterans, offering them free computers and gift cards to sign up for what they thought were classes taught by Caldwell University. Yet when Ed4Mil enrolled the students, they would put them in and pay for unaccredited correspondence school classes—but then charge the government the university tuition rates and pocket the difference.

At the center of the scheme was Ed4Mil founder and president David Alvey. The Harrisburg, Pennsylvania resident saw a business opportunity in educating veterans with government funds but learned that when the government provides tuition and other educational benefits directly to a school, certain requirements must be met that his startup could not satisfy.

To get around the law, Alvey conspired with a Caldwell University official to use the university’s name on coursework that the VA would not have approved. The official—then an associate dean at the school—falsely certified that students were taking the same courses from the same instructors who taught on campus at Caldwell.

But the veterans were instead enrolled in online courses like archery and heavy diesel mechanics that were actually taught by the correspondence school. Students sometimes received a housing allowance for the online school, in violation of the rules governing educational benefits.

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CBP and Otter Products Partner to Prevent Counterfeit Phone Cases

WASHINGTON—U.S. Customs and Border Protection (CBP) announced today a new formal partnership arrangement with Otter Products, LLC, maker of OtterBox and LifeProof brand phone cases, as part of the Donations Acceptance Program. Under its partnership with CBP, Otter Products will donate authentication devices for CBP officers and import specialists to use to quickly and accurately detect counterfeit Otter Products merchandise entering the United States.

“Building off the success of localized enforcement efforts, CBP is now working hand-in-hand with Otter Products to target and deploy authentication devices on a nation-wide scale,” said Todd C. Owen, Executive Assistant Commissioner, Office of Field Operations. “CBP’s formal partnership with Otter Products will help us broadly deliver these highly effective tools to the front line officers and trade specialists who need them most.”

As part of its rigorous and ongoing brand protection efforts, Otter Products intends to partner with CBP for the long term by resupplying and, if necessary, upgrading authentication devices as CBP’s detection needs evolve.

“CBP’s formal partnership with Otter Products extends well beyond the initial deployment of authentication devices,” said Brenda B. Smith, Executive Assistant Commissioner, Office of Trade. “Our goal is to provide continuous, organized feedback to Otter Products pertaining to the ongoing use of these devices, their effectiveness, and opportunities to improve upon them so that we may jointly outpace those who seek to profit off counterfeit goods.”

The Donations Acceptance Program broadly enables CBP to accept donations of real property, personal property (including monetary donations) and non-personal services from public and private sector entities in support of CBP operations. Accepted donations may be used for port of entry construction, alterations, operations, and maintenance activities.

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601 Defendants Charged, More Than $2 Billion in Fraud Losses Recorded

FBI Deputy Director David Bowdich took part in a press conference today with U.S. Attorney General Jeff Sessions, Health and Human Services (HHS) Secretary Alex Azar III, and other federal officials to announce a nationwide health care fraud and opioid takedown that has resulted in charges against 601 defendants around the country, along with a total of more than $2 billion in fraud losses.

This takedown, the largest health care enforcement action taken to date by the joint Department of Justice and HHS Medicare Fraud Strike Force, involved numerous federal and state agencies working together on the front lines in the fight against health care fraud. “But our work is not finished—we are just getting started,” said Sessions. “We will continue to find, arrest, prosecute, convict, and incarcerate fraudsters and drug dealers, wherever they are.”

The charges announced today aggressively targeted schemes billing Medicare, Medicaid, TRICARE (a health insurance program for members and veterans of the armed forces and family members), and private insurance companies. Some of these schemes involved medically unnecessary prescription drugs and compounded medications that were often never even purchased and/or distributed to beneficiaries. In other cases, patient recruiters, beneficiaries, and other co-conspirators were allegedly paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills for services that were medically unnecessary or never performed.

According to Bowdich, “Any good criminal investigator or analyst will tell you that to find the criminals, you have to follow the money. And the people we’ve charged this week viewed our health care system as their personal ATM.”

Another focus of the operation was medical professionals allegedly involved in the unlawful distribution of opioids and other prescription narcotics.

Because virtually every health care fraud scheme requires a corrupt medical professional to be involved in order for Medicare or Medicaid to pay the fraudulent claims, aggressively pursuing these corrupt professionals not only has a deterrent effect on other medical professionals who might be tempted but also ensures that their licenses can no longer be used to bilk the system. Among those charged in this operation were 165 doctors, nurses, and other licensed medical professionals.

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Ponzi Scheme Resulted in $10 Million in Losses for Investors

In July 2008, special agents from the FBI Sacramento Field Office executed a search warrant at the residence of a suspect and interviewed other individuals in connection with a mortgage fraud investigation.

In addition to finding evidence for their own case, investigators uncovered ties to what appeared to be a separate mortgage fraud scheme, and FBI Sacramento opened another case, working in partnership with the Internal Revenue Service (IRS) Criminal Investigation.

The main subject of the second case was Lee Loomis, president of Loomis Wealth Solutions, a company based in Roseville, California, but operating in about half a dozen states. And it wasn’t long before FBI and IRS investigators realized they were dealing with a much broader criminal scheme, and that mortgage fraud was just the tip of the iceberg.

After a long-term and complex investigation by law enforcement, Loomis was charged, pleaded guilty, and sentenced earlier this year for running a multi-faceted investment fraud/Ponzi scheme that caused millions of dollars in losses to more than 183 investors.

By reviewing voluminous amounts of evidence—including personal and company records, real estate records, bank records, financial statements, etc.—and questioning victims, employees of Loomis-owned entities, and others, investigators learned that from 2006 through 2008, Loomis offered what he called a “wealth-building program.”

During seminars about his company held at hotels and casinos, he boasted of unusually high rates of return for anyone who invested with him, and he advertised individualized financial family planning to help prospective clients earn money for college tuitions and retirement. Those attending the seminars were then asked to submit financial information including tax returns, pay stubs, copies of bills, and information concerning their home equity. Loomis would analyze this information and—targeting families with substantial home equity and good credit—invite them to a private two-day workshop.

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Conviction of husband-wife team in Amazon case signals

The sentencing of three people who committed over $1 million in return fraud at Amazon points to a cottage industry of bogus returns.

Earlier this month, United States Attorney Josh Minkler announced that three individuals were sentenced up to 71 months for defrauding Amazon out of $1.2 million in consumer electronics items.

Erin Finan, 38, and Leah Finan, 38, a husband and wife from Indiana, pleaded guilty to federal mail fraud and money laundering charges, the Department of Justice, U.S. Attorney’s Office Southern District of Indiana, said earlier this month.

The two were sentenced to 71 months and 68 months respectively. Danijel Glumac, 29, of Indianapolis, pleaded guilty to money laundering and to fencing the items the Finans stole and was sentenced to 24 months in prison.

The three went on a return binge between 2014 and 2016, stealing and selling over 2,700 items, including GoPro digital cameras, Microsoft Xboxes, Microsoft Surface tablets, and MacBooks.

The scheme works by exploiting Amazon’s customer service policy. Basically, they claim that the items they ordered were damaged or not working and then request and receive replacements from Amazon at no charge, the U.S. Attorney’s office said in a statement.

The Finans would place thousands of Amazon orders, create multiple false identities, and get the stolen goods from retail shipping stores all over Indiana, the U.S. Attorney’s office said. Then sell them to their fence, Glumac. In two years, they made roughly $750,000.

“Fraud had become a way of life. Their Amazon scheme was their ‘job,’” the U.S. attorney said in a statement.

This is reflected in the numbers reported by the National Retail Federation (NRF) in a targeted survey for 2017. Of total annual returns and exchanges, the average fraudulent return was expected to be 10.8 percent, up from 8.8 percent in 2015, according to the NRF.

“Return fraud continues to pose a serious threat to the retail industry,” the NRF said in its 2017 Organized Retail Crime Survey.  The most common (about two-thirds) is “the return of stolen merchandise and employee return fraud,” the NRF said.

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FBI Warns of Posting Hoax Threats

Today, the Federal Bureau of Investigation is announcing a campaign to educate the public on the consequences of posting hoax threats to schools and other public places and reminds communities that these hoax threats are not a joke.

In the aftermath of tragic shootings such as the ones at Santa Fe High School in Texas and Marjory Stoneman Douglas High School in Florida, the FBI and law enforcement around the country often see an increase in threats made to schools and other public forums.

The FBI and our partners follow up on every tip we receive from the public and analyze and investigate all threats to determine their credibility. Federal, state, and local law enforcement then employ a full range of tools to mitigate those threats that are deemed credible. Making false threats drains law enforcement resources and cost taxpayers a lot of money. When an investigation concludes there was a false or hoax threat made to a school or another public place, a federal charge could be considered, which carries a maximum sentence of five years in prison. If a federal charge is not warranted, state charges can be considered.

Public assistance is crucial to our efforts to curb these hoax threats. We ask that the public continue to contact law enforcement to report any potential threats or suspicious activity. If there is any reason to believe the safety of others is at risk, we ask that the public immediately reach out to their local police department by calling 911, or contact the FBI via tips.fbi.gov or over the phone (1-800-CALL-FBI). As always, members of the public can call their nearest FBI field office to report a tip.

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$43 Million Ponzi Scheme Fleeced Tennessee Friends and Neighbors

Nobody would have suspected that the affable Tennessee tractor salesman who was raised among them, tended their lawns in high school, and prayed beside them at Sunday services was scamming them by the millions. Indeed, that’s probably what made the man’s investment scheme so successful, investigators say.

Jeffery Gentry, 40, pleaded guilty in federal court last August to charges related to his $43 million scheme that bilked investors—including friends, family, neighbors, and fellow parishioners—out of more than $10 million. Gentry, who owned and operated Gentry Brothers Tractor Supply and Gentry Auto in the Middle Tennessee town of Sparta, was sentenced on May 14 in U.S. District Court in Nashville to three years in prison. He was also ordered to pay $10.4 million in restitution to his victims.

Gentry’s scam was a textbook Ponzi scheme that promised investors high guaranteed rates of return on investments. He told investors the funds would finance the purchase of mowers and farm equipment to satisfy lucrative state contracts. In return, investors could expect monthly proceeds as high as 10 percent, thanks in part to rebates from equipment manufacturers for cash purchases, according to investigators. But it was all a lie, sustained in large part by investors’ faith that a lifelong neighbor and friend would never purposely do them wrong.

“He kind of preyed on that aspect of it,” said Jeff Guth, chief of the Sparta Police Department in White County, a close-knit rural community of 26,000 residents where the median household income is about $36,000. “Most of these people were friends of his. A lot of them went to church with him. They wouldn’t believe that someone close to them like that would be doing that.”

Guth learned of the scheme a few days before Christmas in 2016, when the police station lobby filled up with distraught investors fearing they had been duped. Gentry’s tractor store—an informal gathering spot where many of the investment transactions occurred—had shut down without explanation, suddenly casting doubt on their guaranteed returns. At the police station, former farmers and other retirees waved handwritten statements revealing their six-figure outlays, much of it from savings and retirement accounts. Suspecting there would be still more victims, Guth called the FBI in nearby Cookeville—a satellite office of the Bureau’s Memphis Division—for support.

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