| #535 - January 11, 2008 |
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| #535 Updated: 1/11/08 9:51 a.m. Former MCI manager recalls life of crime deseretnews.com | 1/10/08 | Nancy Perkins ST. GEORGE — Walt Pavlo, a former mid-level manager at MCI, recounted his meteoric rise within the telecommunications giant and his equally stunning plunge into the seedy world of money laundering and wire fraud to audience members at the Washington County Economic Summit in St. George on Wednesday. "I grossly underestimated the pressure of being involved in something like that," Pavlo, the summit's keynote speaker, told more than 900 people attending the yearly event billed as "What's Up Down South." "I knew I was leading a double life, but I underestimated the power of my own conscience." Pavlo was responsible for billing and collections in the company's reseller's division in Atlanta, a job that involved nearly $1 billion in monthly revenue for MCI's carrier finance division. Those customers, Pavlo said, raked in the cash selling prepaid calling cards to various ethnic groups and charging exorbitant rates to link customers to telephone numbers tied to the adult entertainment industry. In 1996, as his customers began to fall behind on making their monthly payments, Pavlo said he and a fellow staff member and an outside business associate concocted a scheme to force customers to pay their bills through an intermediary. "We set up a customer sting and pressured them to pay up or be disconnected," Pavlo said, adding he knew each customer would be desperate to keep the telephone lines open with MCI in order to continue making money. "That's when we sent our angel investor in." Deals were set up with seven customers of MCI, he said, defrauding MCI of $6 million in cash that was sent in payments to a bank in the Cayman Islands. When a minor auditing error was noticed at work, Pavlo said, he became paranoid and quit his job, fearing the worst. Within weeks, the FBI launched an investigation. "I was afraid. I didn't want to go to prison," Pavlo said. "I wondered if I couldn't just say, 'I'm sorry' or ask if there was something else I could do. But there are severe consequences for white- collar crime." In 2001, Pavlo pleaded guilty to wire fraud, money laundering and obstruction of justice, and served two years in a federal prison. While there, an FBI agent sought him out as a speaker on the ramifications of white-collar crime and the ethical decisions that people face every day in the workplace, he said. "Initially, I saw this as a victimless crime. I didn't see victims like the shareholders or my family," said Pavlo, telling the crowd he lost everything he had, including his family, as a direct result of his actions. "Your family can accept the fact that you have a terminal disease easier than the news that you're going to prison." Pavlo, who holds an engineering degree from West Virginia University and an MBA from Mercer University, said he still wonders why he did something so wrong. "I'm not a bad person," he said. "The reason I enjoy speaking to groups and telling my story is because I want to protect the person, those people in the workplace, from temptation. Many of us know someone who fell short." Pavlo has written a book, "Stolen Without a Gun," detailing his experience and now speaks nationwide about his former life of crime. MAN PLEADS GUILTY IN INVESTMENT FRAUD SCHEME fbi.gov | 1/11/08 | Press Release Baltimore, Maryland - David McDowell Robinson, age 56, of Baltimore, pleaded guilty today prior to jury selection at today’s scheduled trial to 27 counts of wire and mail fraud arising from a fraudulent investment scheme involving over 900 investors throughout the country, announced United States Attorney for the District of Maryland Rod J. Rosenstein. U.S. Attorney Rod J. Rosenstein said, "This case demonstrates how important it is for people to be cautious about investment proposals that sound too good to be true. David Robinson perpetrated an $8 million Ponzi scheme that victimized innocent investors, including Hurricane Katrina victims who were induced to invest their money in a worthless venture." According to the 27-count indictment to which Robinson pleaded guilty as modified in court, Robinson was the sole shareholder, president and chief executive officer of Liberty Trade International, Inc. (LTI) from its original incorporation in April 2003 until a court-appointed receiver took control of LTI in March, 2006. During that time, Robinson directed all of LTI’s operations and controlled the company’s assets. LTI solicited investors throughout the country by means of e-mail, voice-mail, public meetings and word of mouth, offering three investment options: invest $2,500 at a 20% rate of return over 60 days; invest $5,000 at a 25% rate over 90 days; or invest $10,000 at a 30% rate over 120 days. LTI accepted investments from September 2004 to March 2006, receiving over $8 million in funds from over 900 investors. Robinson falsely represented to investors that LTI would provide short-term financing to home buyers or persons refinancing their homes to generate the returns necessary to pay the promised rates of interest; that these loans would all be secured by liens against real estate having substantial equity; and that a separate reserve account owned by LTI would be established to ensure timely repayments and interest to investors. None of these representations were true. Instead, LTI investors received unsecured, uncollateralized and uninsured promissory notes. Robinson extended only around $300,000 in loans to individuals who were personal acquaintances, none of which were capable of generating sufficient returns to pay the amounts he had promised investors, and most of which carried little or no security. Rather than use funds generated by loans or real estate transactions to pay the rates of return promised to its investors by LTI, Robinson instead used funds received by LTI from its own investors to pay the promised rates of return. Between September 2004 and March 2006, LTI made payments of principal or interest to its investors totaling almost $3.6 million, all of which was derived from principal invested by other LTI investors. Starting in November 2005, LTI began to run short of funds to pay the returns owed to its investors. In January 2006, as part of a search for new investors, Robinson dispatched an LTI employee to Gulfport, Mississippi to make a presentation about LTI. Many of those attending the presentation were victims of Hurricane Katrina in September 2005. LTI received about $80,000 in investments from residents of the Mississippi Gulf Coast area as a result of that presentation. The Securities Division of the Maryland Attorney General’s Office began an investigation of Robinson and LTI in February 2006. As a result of litigation commenced by the Securities Division, LTI’s assets were placed under the control of a court-appointed receiver on March 26, 2006. The court- appointed receiver found that LTI owed its investors about $7.082 million, and that LTI’s obligations to its investors were continuing to accrue at a rate of over $600,000 a month. In contrast, LTI’s assets consisted of approximately $1.4 million in its bank accounts, approximately $300,000 in outstanding personal and business loans of varying degrees of collectibility; and ownership interests in real estate located in Georgia and North Carolina that were worth substantially less than the approximately $2 million expended to acquire them. Robinson is alleged to have expended over $600,000 in investors’ funds received by LTI on personal items; presents for a family member and female friends, including a mink coat for a woman with whom Robinson was romantically involved; and leases of luxury automobiles. Ex-BofA employee faces embezzlement charge bizjournals.com | 1/11/08 | Staff Writer A former employee at Bank of America Corp. has been arrested and charged with embezzlement by a bank officer. Francisco Fernandez is being held without bond pending a hearing set for Tuesday. According to documents filed in the U.S. District Court in Charlotte, Fernandez is accused of embezzling more than $457,000 from July through December while employed as an officer at Charlotte-based BofA (NYSE:BAC). According to the documents, he is accused of giving one of the bank's customers, Missouribased Key Bank, his personal bank account number to wire payments into instead of the correct BofA account number. If convicted, Fernandez faces a maximum penalty of 30 years in prison and a $1 million fine. 2 men sentenced on scrap paper tax fraud connpost.com | 1/10/08 | Michael Mayko BRIDGEPORT — A scheme to turn waste paper into green paper resulted in two Fairfield County men going to prison. Senior U.S. District Judge Alan H. Nevas sentenced Ronald A. Lupica, 63, of Norwalk, to 15 months in prison followed by three years of supervised release. Lupica also agreed to repay ARC $1.4 million as well as $249,111 plus interest to the IRS for taxes on unreported income made through the fraud. Last month, Nevas sentenced Daniel Arciola to a year and a day in prison for tax evasion. Lupica and Arciola, a former quality control specialist for ARC, diverted waste paper collected by ARC to paper mills for recycling. Lupica created Empire Trucking, a nonexistent company. From mid- 1999 to August 2002, the pair issued invoices to the mills claiming the nonexistent Empire Trucking was an ARC subsidiary. The mills paid Empire $1.4 million during the time. To conceal this income, neither man reported it to the IRS. Lupica received $323,727 from the scheme in 2000 but failed to file a tax return that would have required him to pay $104,124 in taxes. He pleaded guilty to tax evasion, mail fraud and bankruptcy fraud. ARC is owned by James Galante, the Fairfield County trash magnate, who is under federal indictment for violating racketeering laws. That case involves evidence that the Genovese Crime Family helped Galante control trash hauling in Fairfield and Westchester County. Galante has maintained his innocence. UN probes allegations of corruption, fraud reuters.com | 1/11/08 |Louis Charbonneau UNITED NATIONS, Jan 10 (Reuters) - The United Nation's internal auditing agency said on Thursday it was investigating some 250 corruption cases including alleged sexual abuse by peacekeepers and financial irregularities, and it has found the extent of misbehavior surprising. "Our caseload has been very steady over the last three months, around 250 cases," Inga-Britt Ahlenius, head of the U.N. Office of Internal Oversight Services (OIOS), told reporters. "We can say that we found mismanagement and fraud and corruption to an extent we didn't really expect." Ahlenius said two-thirds of the cases under investigation related to peacekeeping missions. Of those, around 80 were allegations of sexual exploitation and abuse in countries including Haiti and Liberia. Ahlenius, the former chief auditor of Sweden, held the news conference in response to media reports suggesting that there has been widespread fraud related to U. N. peacekeeping contracts. She said that out of a total value of around $1.4 billion of peacekeeping contracts that had initially aroused suspicion, contracts worth around $600 million were confirmed to have involved fraud at some level. The total U.N. peacekeeping budget for 2007-2008 amounts to over $5 billion. Robert Appleton, head of the OIOS's Procurement Task Force, a temporary body set up in 2006 after the corruption scandal involving the U.N. oil-for-food program in Iraq, said only a minority of U.N. contracts involved irregularities. Appleton added that many of the allegations of corruption and fraud ultimately turn out to be unsubstantiated. Ahlenius said the OIOS had begun reviewing a $250 million contract the United Nations signed with a unit of U.S. defense firm Lockheed Martin Corp (LMT.N: Quote, Profile, Research) to build five peacekeeping bases in Sudan's western region of Darfur, which has been racked by five years of war, without competitive bidding. "We have been mandated by the General Assembly to carry out a review of the circumstances (of the contract)." she said. No deadline has been given for the review, though Ahlenius said she was treating it "as an urgent matter." U.N. Secretary- General Ban Ki-moon has come under fire for awarding the contract to Lockheed unit Pacific Architects and Engineers Inc without opening the field to competitors. In December the U.N. General Assembly passed a resolution criticizing Ban for his decision and demanding the OIOS review. Ban has defended his action, saying current U.N. rules allow him to award such contracts in exceptional cases. ________________________ |