#539 - January 18, 2008
#539 Updated: 1/18/08 4:04 p.m.

Brocade ex-CEO Reyes sentenced to 21 months in prison
mercurynews.com | 1/17/08 | Pete Carey
A tearful Gregory Reyes was sentenced Wednesday to 21 months in prison for his role in an
illegal stock-option backdating scheme at Brocade Communications Systems, the company he
once ran.  Reyes also was ordered to pay a $15 million fine. The tough sentence, longer than
had been expected but much less than the maximum for Reyes' crimes, was clearly intended
by U.S. District Judge Charles Breyer to warn executives about the consequences of breaking
securities laws and lying to investors.  "What this case is really about is the failure of a CEO
of a publicly traded company" to fully disclose important financial information, Breyer told the
packed courtroom. "It is about lying to his company."  In a tearful plea for leniency - at one
point, Breyer called a five-minute recess to allow Reyes to regain his composure - the former
chief executive vowed to learn from his experience.  "I am sorry. . . . There is much that I
regret, and if I could turn back the clock, I would have done things differently. I will try every
day from this day to reearn the trust that was placed in me.  "I've tried to lead a good life.
This experience has humbled me in more ways than I can express in words, but I am
determined to learn from it."  In exacting detail, Breyer described the way he
settled on the tough sentence for Reyes' conviction in the first backdating case to go to trial.
In Reyes' favor were the 400 letters sent to the judge citing the former CEO's anonymous help
to the less fortunate. "It's only fair to give some recognition for his extraordinary acts of
generosity," said Breyer. "He is the essence of what you want to see of an individual
to whom much has been given and who has given much."  But he increased the sentence
because he thought Reyes had obstructed justice and lied in a related case, involving a court
filing by Reyes arguing that his trial be separated from that of Stephanie Jensen, Brocade's
former vice president of human resources.  Robert Weisberg, a Stanford University law
professor, said Breyer "has come up with a sentence that won't ruin his life but is a pretty
sharp deterrent message, no question about it."  The prison sentence, to be followed by two
years of supervised release, was stayed pending appeal of the case.  The sentence left the
courtroom stunned and hushed. Reyes, 45, embraced his wife, Penny, then moved slowly
toward the courtroom door, stopping for hugs with the many supporters who crowded the
courtroom. Outside the courtroom after the hearing, a subdued Reyes chatted and exchanged
more hugs with relatives and supporters, including former investment banker Frank
Quattrone, who himself beat obstruction-of-justice charges in a different case.

Pair charged in cemetery fraud
indystar.com | 1/18/08 | Jon Murray
Investigators said a New Jersey couple bought an Indianapolis company that owned
several cemeteries with one goal in mind: plundering its $24 million trust fund.  The money
was supposed to be set aside to take care of burial plots and cemetery grounds far into the
future, but within three years the couple drained the fund, Marion County prosecutors said
Thursday after filing criminal charges against Robert E. Nelms and Debora Johnson.  The
solvency of six cemeteries throughout Indiana, including properties in Johnson and Boone
counties, could be at risk, state officials said. The family that sold Memory Gardens
Management Corp. to Nelms in December 2004 feels betrayed.  "All of us are devastated by
what has taken place," said Jim Meyer, 56. He worked alongside his brother and their father,
Fred N. Meyer Jr., for 30 years and is concerned that promises made to their customers will be
broken. The company also owned properties in Ohio and Michigan.  The Meyers filed a lawsuit
this month in Johnson County to force payment of about $8 million still owed by Nelms
through promissory notes. A former employee told the family that under the new ownership,
improper activity was taking place.  Johnson and Nelms, now Memory Gardens' president and
chief executive, face accusations of using the trust fund to finance the $13.5 million down
payment on the company and to pay nearly $900,000 for a house and land in Greenwood.
On Thursday, the Indiana attorney general and the state's securities commissioner obtained
an order from a Johnson Superior Court judge to freeze assets owned by Nelms and
Memory Gardens.  They also joined the Meyer family's request to appoint a receiver to take
over the company and scrutinize its books. Judge Kim Van Valer did not rule on that issue
Thursday. It was the Meyer family who prompted the criminal investigation. Marion County
prosecutor's grand jury investigators and the Indiana secretary of state's Securities Division
found as much as $27 million was misspent from perpetual-care funds involving six
cemeteries, including at least one purchased later by Nelms .  Indiana law requires privately
owned cemeteries to have such funds so that maintenance costs are always covered. A
portion of burial fees charged to bereaved families is funneled into the trust.  Secretary of
State Todd Rokita said he hoped to recover as much of the money as possible.  "The fund was
raided," he said during a news conference Thursday in his Statehouse office.  "Absolutely, he
came here to Indiana to do this very thing."  Robert Schembs, an Indianapolis attorney
representing Johnson, said she did not take part
in any wrongdoing. She turned herself in Thursday evening.
"She was a commissioned employee in the funeral business and had no power to direct the
movement of millions of dollars," Schembs said in a statement.
He added that Johnson recently learned that her marriage to Nelms had never been legal.
They were married in Jamaica, Schembs said; Nelms told a bail officer Thursday that they
had been married about four years.
A spokesman for Memory Gardens did not return a phone message.
But last week, Alan Bucksot, director of corporate affairs, said customers in Indiana should
not be worried by similar allegations in Michigan over the misuse of $4.2 million from a
cemetery trust in that state. Indiana officials said no charges have been filed in Michigan.
"We don't know where these rumors come from," Bucksot said last week. "No customer, no
consumer has anything to lose. They're not at risk." In Indiana, investigators said Nelms
dipped into the money in Memory Gardens' fund within days of purchasing the company.
The complex scheme involved the issuance of hundreds of bonds without collateral, making
the transactions more difficult to track, said Chris Naylor, the securities commissioner.
The money was moved to a small Hamilton County bank, Community Trust and Investment
in Noblesville. Prosecutors say the bank allowed such bonds when larger ones would not.
The Meyers agreed to a $21 million price for the company. They received the large down
payment and signed promissory notes with Nelms, who had operated cemeteries in New
York and New Jersey with Johnson. The affidavit lists several other transfers totaling nearly
$10 million that investigators said were improper. It's not clear what the money was used for.
By April 2005, the affidavit says, all of the trust money was gone. Several finance advisers
helped arrange the transactions, Naylor said, but investigators are still sorting out whether
they violated the law.  "They are all potential targets," said Barbara Crawford, the
prosecutor's chief charging deputy.  Attorney General Steve Carter said Nelms and Johnson
had orchestrated an "abuse of trust." He said he is working with state legislators to tighten
Indiana laws that govern the cemetery trusts.  The health of Fred Meyer, the family patriarch,
is failing, and he is in critical care, Jim Meyer said. His father wasn't aware of the criminal
charges. "This has been very difficult for him," Jim Meyer said. "I'm sure that he will be
pleased."

Appeal denied in embezzlement case
record-eagle.com | 1/18/08 | Staff Writer
CHARLEVOIX -- Karla Sue Lockman will stay behind prison bars until at least September 2011.
The Michigan Court of Appeals this week denied an appeal to Lockman's sentence, which
upholds Charlevoix Circuit Court Judge Richard Pajtas' decision to send her to prison well
beyond the recommended maximum 17 months. She received two concurrent sentences of
five to 10 years and is held at a state women's prison in Ypsilanti.  Lockman, 37, of Boyne
City, was convicted in 2006 of embezzling more than $859,000 from her employer, Northern
Preferred Title Co. in Charlevoix County. That bankrupted the business and threw more than a
dozen workers from three offices into the ranks of the unemployed. The trial court legally was
correct to hike the sentence, based on the amount stolen and the devastating effect
on others, ruled Michigan Appellate Judges Alton Davis, William Murphy and Helene White.
The judges described how the large amount of stolen money "keenly attracts and irresistibly
holds this court's attention. This is an exceptional case," they wrote.  "I'm pleased to be
upheld and to have followed the law correctly," Pajtas said. The appeal was based on the
constitutionality of a maximum sentence that's more than seven times the standard, said
State Appellate Defender Christine Pagac, who represented Lockman. "Who wouldn't appeal
that?" she said.  Others said the long sentence is justified.  "It's a devastating case that will
affect people for years to come," said Rusty Hills, spokesman for the state Attorney General's
Office, which argued the punishment fit the crime.  Lockman was ordered in December to pay
full restitution and still owes nearly $493,000 after more than $366,000 was collected when
her assets were sold at auction.  Meanwhile, there's a pending criminal investigation into
Lockman's husband, Kevin Lockman, a former conservation officer for the Michigan Department
of Natural Resources. He is accused of knowingly spending stolen money to retain a lawyer for
his wife when she was under investigation by the Boyne City Police Department.  Special
Prosecutor Charles Koop from Antrim County is reviewing the case this week and has not yet
decided whether to charge Kevin Lockman, he said.  

Two women indicted on embezzlement
mccookgazette.com |
OMAHA -- A federal grand jury has returned unsealed indictments against two Southwest
Nebraska women accused of embezzlement in separate cases, according to U.S. Attorney Joe
W. Stecher.  The first, Diane L. Rich, of Cambridge, is charged with embezzling approximately
$58,000 on or about Jan. 4, 2004, through on or about July 21, 2006, from the Rural Housing
Service, a program of the U.S.  Department of Agriculture. The maximum possible penalty if
convicted, includes imprisonment of 30 years, a $1,000,000 fine, a 5 year term of supervised
release, and a $100 special assessment.  The second, Jeannie Wilson, age 28, of Orleans, is
charged in a two-count indictment. Count I alleges that on or about Dec. 22, 2006, through on
or about Dec. 20, 2007, Wilson embezzled funds from the Atlanta Nebraska Post Office.
The maximum possible penalty if convicted, includes imprisonment of 10 years, a fine of
$250,000, followed by 3 years of supervised release and a $100 special assessment. Count II
of the indictment charges that on or about June 26, 2007, through on or about November 21,
2007, Wilson stole United States Postal Service Money Orders. The maximum possible penalty,
includes imprisonment of 5 years,  a fine of $250,000, followed by 3 years of supervised
release and a $100 special assessment. Indictments are charging documents that contain one
or more individual counts that are merely accusations, and every defendant is presumed
innocent unless and until proven guilty.

Romanian soccer investigated for tax evasion, embezzlement, money laundering
canadianpress.google.com | 1/17/08 | Staff Writer
laundering and tax evasion in the transfer of Romanian players to foreign clubs.  The
prosecutors say the state should have received 1.7 million euros (C$2.5 million) in revenue
and tax if the actual amounts of money received in the transfers had been registered in the
accounts of the clubs.  Romanian prosecutors pieced together information about finances
related to soccer deals from countries such as the Netherlands, Spain, Italy, China and South
Korea. They say 12 players were transferred to foreign clubs for bigger amounts of money
than stated in the accounts.  Ten people are under investigation, including Rapid Bucharest
chairman Gheorghe Copos and Dinamo chairman Cristi Borcea. The 10 are accused of diverting
more than 10 million euros (C$14.6 million) to bank accounts of offshore companies from the
Virgin Islands and the Netherlands to avoid paying the full tax. Soccer is one of the most
popular sports in Romania, but it has recently been marred by claims of corruption and
match-fixing.

Hospital embezzler avoids jail
rutlandherald.com | 1/18/08 | Dawson Raspuzzi
A woman convicted of embezzling $77,600 from the Rutland hospital avoided jail time after
pleading guilty to one felony count in Rutland District Court on Thursday.  Jodie L. Keith, 29, of
Plains Road in Pittsford, was sentenced to serve 18 to 36 months in prison, all of which were
suspended on the condition she pay the entire amount of money back to Rutland Regional
Medical Center, where she was formally employed.  Court documents state Keith is to pay
$5,000 to the hospital by certified check, which is the amount of losses that the hospital's
insurance company, Travelers Insurance Co. of Hartford, Conn., did not cover.  Keith was also
required to pay $36,000 by certified check to Travelers Insurance Co. of Hartford, Conn., at
the time of the sentencing, according to court records.  Records also state that the rest of the
money embezzled is to be given to Travelers Insurance Co. in payments of $250 per month
until the remaining loss is paid in full. In addition, Keith's conditions include that she
participate in 100 hours of community service, and pay a $26 fine.  Keith was charged with 16
counts of embezzlement and four counts of forgery, all of which were dismissed excluding the
one embezzlement charge to which she pleaded guilty, according to court records.
The maximum sentence for a single charge of embezzlement is 10 years in prison and a
$500 fine.  The case dates back to April 2006, when Rutland city police said an internal audit
at RRMC found two unauthorized checks from the James T. Bowse Community Health Trust
account made payable to one of Keith's family members.  At that time, Keith was working as
an accountant at hospital.  Police said Keith admitted to hospital officials that she had written
the checks with intentions of paying the hospital back. Investigations stemming from the
incident turned up several additional checks.
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