#523 - December 18, 2007
#523 Updated: 12/18/07 8:16 a.m.

Fourth defendant pleads guilty in $25 million bank fraud
kansascity.com | 12/17/07 | Mark Davis
A fourth defendant has pleaded guilty in the $25 million bank fraud indictment that focused on
the business dealings of Kansas City area homebuilder F. Jeffrey Miller.  Steve Middleton, 46,
of the Stilwell community in Johnson County, pleaded guilty Monday to one count of conspiracy
to commit bank fraud in the case. He also pleaded guilty Monday to an identical charge in a $1
million fraud case that named Middleton and a Belton man. Patrick Peters, Middleton’s
attorney, had said previously that his client would plead not guilty. The change came under a
plea agreement with prosecutors in which most charges were dropped and Middleton agreed
to cooperate with the government, Peters said.

Prosecutors said Middleton admitted taking part in a conspiracy to inflate the appraised
values of homes by refusing to pay appraisers if they did not meet the price set by Miller,
selling houses in subdivisions at inflated prices, forgiving second mortgages on inflated
properties and using Miller-built homes as comparables in the appraisals. He also admitted
that the conspirators created false loan applications and documents to qualify borrowers, who
had poor credit and financial problems that would have kept them from getting loans, federal
authorities said. Prosecutors have called the Miller operation a “fraudulent real estate
machine” that encouraged homebuyers to move in before their loans were completed. At the
loan closing, conspirators allegedly raised the sales prices and created second mortgages to
cover the amount. Middleton faced only 10 counts in the original Miller indictment in May 2006.
A grand jury greatly expanded charges in a superseding indictment last August, including
Middleton in all 60 counts. Middleton faces up to 30 years in prison and $1 million in fines at
his sentencing scheduled for March 24. Three others pleaded guilty to charges previously and
await sentencing. A fourth, Judy Brumble, is scheduled for a change of plea hearing Jan. 7.
Nine others, including Miller, await trail in the original and related cases.

Ex-JSU employee pleads guilty to stealing school funds
clarionledger.com | 12/17/07 | Staff Writer
A former purchasing agent at Jackson State University accused of stealing $86,388 from the
school has pleaded guilty to embezzlement.  Sandreia Vina Jones, 36, received a five-year
sentence with four years and 364 days suspended and five years post release supervision,
based on an order signed by Hinds County Circuit Judge Winston Kidd earlier this month.
She had to serve one day and received credit for time served. She must make $31,441.88 in
restitution to the state auditor’s office at $485 a month and attend Gambler’s Anonymous.
Jones was indicted last year on one count of embezzlement and was arrested in January. She
was accused of embezzling $86,388 between Oct. 1, 2003 and August 2004. She used a
credit card issued to her by JSU for school business for personal gain, the auditor’s office said.
Jones worked for the university from August 2001 until Aug. 12, 2004 when she was
terminated, according to the state auditor’s office. She already had an embezzlement
conviction when she was hired. The university has had no comment about her arrest.
She was convicted of embezzlement several years ago in Marshall County Circuit Court,
according to the Mississippi Department of Corrections. In February 2002, Jones was
sentenced to five years of intensive-supervision probation, or house arrest. “It is bad enough
when public officials embezzle taxpayer's monies for mere selfish gain. But to steal money
from education, from that which is so critical to the betterment of our state and our students,
is

beyond the bounds of conscience,” State Auditor Phil Bryant said in a statement.
Bryant thanked Jackson State officials and the Hinds County District Attorney's Office “for their
exceptional cooperation in the investigation and prosecution of this case. Hopefully, we will
see the return of every stolen dollar to the university.”

Former official pleads no contest
Providence Journal | 12/18/07 | John Castelucci
PROVIDENCE — Former Pawtucket School Committee member Everett “Ed” Dunn pleaded no
contest to embezzlement yesterday, two and a half years after he was arrested and charged
with looting the bank account of an elderly woman suffering from dementia who employed him
as a nurse.  Dunn, 58, was accused of embezzling $219,000 from 89-year-old Jennie M. Rucci
and using the money to buy a condominium in Florida, pay his credit card debts and utility bills
and make a contribution to his own political campaign.  He didn’t deny doing any of those
things, but, in a statement he read in court in the presence of Mrs. Rucci’s family members,
Dunn asserted that Jennie Rucci put her trust in him because she didn’t want her family to
have control of her money or her whereabouts. He said he “provided a level of care beyond
anything anyone could imagine.” “I went to her apartment in the morning, washed her,
dressed her and took her out every day.” Mrs. Rucci responded by becoming extremely fond of
him, Dunn said. “If Jennie and I were standing here together with not one penny in my pocket
I know she would rather be here with me than with anyone else on this earth.”


The magnitude of the embezzlement became clear, however, when Niewiera and her cousins
obtained Mrs. Rucci’s bank records and discovered that Dunn had written 483 checks on her
accounts.  Among the expenditures, according to the lawsuit Strachman filed on behalf of the
family, were $62,208 to pay off Dunn’s and Blais’ loans and credit card debts; $15,429 for
goods and services; $7,034 to pay utility bills; $11,831 in miscellaneous payments; $48,375 in
checks made payable to cash and to Dunn personally; and $62,195 for the condominium in
Florida.  Dunn was running for reelection to the Pawtucket School Committee when the
lawsuit was filed. On Aug. 28, 2004, he dropped out of the race, moving with Blais to Florida.

A criminal investigation was conducted by Sgt. John Lemont and investigator Clifford J.
Coutcher of the state police’s financial crimes unit.  In June 2005, Dunn and Blais were
arrested in Florida and brought back to Rhode Island for arraignment. They were released on
$50,000 bail and allowed to return to Florida while they awaited trial.  The $140,000
restitution figure was negotiated after prosecutors deducted the amount that Dunn and

Blais spent on the Florida condominium.  Roger Demers, the special assistant attorney general
who prosecuted Dunn, said Mrs. Rucci’s family sold the condo for approximately $67,000 after
discovering the purchase, which Dunn attempted to justify as an “investment” on her behalf.
Mrs. Rucci is currently a resident of North Bay Manor in Smithfield. If Dunn had gone to trial,
Demers said, she wouldn’t have been called as a witness because she isn’t competent to
testify. “We would have had to prove the theft case without the victim saying it was a theft,”
he said.

Paris Club embezzlement case widens
UPI.com | 12/17/07 | Staff Writer
MOSCOW, Dec. 17 (UPI) -- Moscow officials issued an arrest warrant for a fourth suspect in a
$43 million embezzlement case from an international debt restructuring fund. The case
centers on allegations against Russian Deputy Finance Minister Sergei Storchak, who is
accused of embezzling $43 million from the Paris Club, an informal consortium of international
financial officials from the world's leading economic nations examining debt relief and
restructuring for indebted countries. The committee overseeing the case said the new arrest
concerned debts relating to the chemical company Sodexim, RIA Novosit said Monday. Officials
detained Storchak Nov. 15 over concerns he would tamper with evidence in the case or
intimidate potential witnesses. The investigating committee also arrested the general director
of Sodexim, Victor Zakharov, and Vadim Volkov, president of the Moscow-based Interregional
Investment Bank in connection with the embezzlement charges.


Developer Pays $52M in Back Taxes
webcpa.com | 12/17/07 | Staff Writer
Igor Olenicoff, a billionaire industrial and commercial property developer, has pleaded guilty to
filing a false 2002 tax return and paid $52 million in back taxes and penalties in an effort to
stay out of jail.  The 65-year-old faces the possibility of three years in prison and is scheduled
for sentencing in April. His wealth is estimated at $1.7 billion by Forbes magazine, which
includes him on its Forbes 400 list at No. 286.  The developer owns 65 commercial properties,
more than 10,000 apartments and 33 residential communities through his company, Olen
Properties. He had denied on his tax filings trying to hide his assets offshore, but admitted in
his plea agreement that he had transferred $346 million to accounts in Switzerland, the
Bahamas and the United Kingdom. Olenicoff has been under investigation by the Internal

Revenue Service for 13 years.

Subprime Lending with Criminal Intent?
cfo.com | 12/17/07 | Stephen Taub
Fallout from the subprime-mortgage mess has spread from corporate balance sheets and civil
actions by regulators into the criminal arena.  Countrywide Financial Corp., the nation's
number-one mortgage lender, is being investigated by the attorneys general of Illinois and
California for its past lending practices, according to several published reports.  Illinois
Attorney General Lisa Madigan has subpoenaed documents from Countrywide relating to its
loanorigination activities, The New York Times reported. She may expand the probe to look at
how homeowners  were approved for mortgages with payments they were unable to afford,
according to the Associated Press. "We're looking at why people who appear to us to not be
able to afford the loans they're in are in these loans and how Countrywide contributed to
that," Deborah Hagan, chief of the attorney general's consumer protection division, told the
wire service.  

The Illinois investigation grew out of a probe into broker One Source Mortgage, which the
state claims got borrowers into loans called pay-option mortgages, according to The Los
Angeles Times. The paper said Countrywide was the chief provider of these loans, which allow
borrowers to pay less than the full interest that comes due each month, which then increases
the loan balance. The loans were marketed to people who otherwise couldn't afford
mortgages.  Some borrowers have said they were not told that low teaser rates would be in
effect for only one month,  while others complained about prepayment penalties if they sold
their homes and that Countrywide refused to waive, The New York Times wrote. The
Securities and Exchange Commission already was looking into stock trades by CEO Angelo
Mozilo before

Countrywide's stock tanked earlier this year.


Despite Advice, Mayor Still Controls Whistleblower Hotline
voiceofsandiego.com | 12/17/07 | Evan McLaughlin
Employees at the city of San Diego still do not have an outlet for anonymously reporting
financial misconduct to the City Council's Audit Committee, even though a rule requiring the
panel to field the concerns of whistleblowers was put in place seven months ago.  Instead,
officials for Mayor Jerry Sanders are still in charge of the hotline. It keeps in place an
arrangement in which City Hall's boss oversees the very forum where potentially embarrassing
complaints about his administration are registered, while also having the power to fire the
thousands of city employees prone to use the hotline.  It's a dynamic that concerns some
officials who want to ensure the whistleblower process is an effective fix for a city that has
suffered the scrutiny federal investigators and the loss of the its credit rating because of past
breakdowns in financial controls.  "Any employees that might want to blow the
whistle on something and it's a particularly sensitive issue to the mayor's administration,
that might cause them to pause," said Jeff Kawar, a fiscal and policy analyst at the
council's Office of the Independent Budget Analyst.  The hotline is among the several
remedies recommended by outside consultants at Kroll Inc. and Vinson & Elkins. Together, the
city paid more than $25 million to for the firms' expert opinions.  The two firms were hired
after the discovery of errors and omission in the city's financial statements, in which the
magnitude of the city's looming multibillion-dollar pension and retiree health care liabilities
were downplayed. The inaccurate financial statements attracted the attention of the
Securities and Exchange Commission, which has since sanctioned the city for securities fraud
and fined its former auditor. Audit firms the city hired subsequent to the 2002 and 2003
disclosure problems have withheld their blessings of the city's financial statements, which has
in turn barred the city from Wall Street.  Vinson & Elkins and Kroll concluded that weak internal
controls -- the checks and balances of ensuring financial statements accurately reflect the
city's financial health -- contributed to the city's reporting errors in 2002 and 2003.  

The Audit Committee expects to hear a presentation next month from outside consultants at
Jefferson Wells about the best way to handle the hotline, said Councilman Kevin Faulconer,
the panel's chairman. Faulconer said he wants to know how other cities arrange their hotlines
so that the city can follow the best practices of government.  One city where the mayor is not
involved in overseeing the hotline is Los Angeles. Employee complaints are routed either
through the controller, who is elected, or the Ethics Commission, which is appointed by
various city officials.  Lee Ann Pelham, the executive director of the Los Angeles City Ethics
Commission, said employees would be more reluctant to complain about misconduct at work if
they knew their calls were being handled by someone who worked for their boss.  

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