White Collar Crime

Federal Law Enforcement Officials Focus on Mortgage Fraud

Published on: July 8, 2008 | by Lasnetski Gihon Law

The federal crime of mortgage fraud has become a priority for federal law enforcement officials, according to a recent FBI press release. Over the last few months, the FBI and Department of Justice have undertaken coordinated efforts to arrest and prosecute those allegedly responsible for committing mortgage fraud. No doubt, the recent and continuing problems with the housing markets and foreclosures throughout Jacksonville, Florida and many other parts of the country have played a significant role in the decision to make mortgage fraud an increasing priority. In approximately three and a half months, over 400 people were charged with mortgage fraud across the country. According to federal officials, these cases involved approximately $1 billion in losses.

The crime of mortgage fraud can occur in a few different ways. A borrower may make misrepresentations on a mortgage application about his/her income, liabilities or intention for the property in order to obtain a mortgage or a better rate on a mortgage. An appraiser may inflate the value of property to entice a lender to approve a higher loan than the property used as collateral would warrant or the fraudulent and excessively high appraisal amount may be obtained to allow the buyer to quickly re-sell, or flip, the house to an unsuspecting buyer (although this is more difficult in today’s difficult housing market). There are many other forms of mortgage fraud. For more information about the various mortgage fraud schemes, go to the FBI’s website which discusses the subject.

What Can I do to Avoid or at Least Detect Financial Identity Crimes?

Published on: July 1, 2008 | by Lasnetski Gihon Law

Financial identify fraud and financial identity theft are increasingly common crimes. A person can be a victim of these financial identity crimes without knowing about it for days, weeks or months. Once a victim of these crimes, it can be very costly and time consuming to get one’s credit and financial situation in the same position it was in prior to the crime.

One way to check and see if your identity or financial accounts have been stolen is to check your credit report. What many people are not aware of is that you can get a copy of your credit report for free once a year. If you want to obtain a copy of your credit report more often than that, you can for a fee. However, it is important to note that there are three companies that maintain credit information- Experian, Equifax and TransUnion. If you want to have a thorough picture of your credit situation, you need to see your credit report from each of the three companies. Why? Well, if someone steals your identity and orders a new credit card with it, that credit card company may check your credit through Experian. Therefore, if you only see your credit report from Equifax, you will not be aware of the fraudulent credit card on the Experian credit report. So, the best course of action is to stagger your order for one free credit report from each company every four months. If you want to order your credit report, go to www.annualcreditreport.com.

Unfortunately, ordering your credit report and seeing an unauthorized entry on there obviously will not prevent your identity or financial information from being stolen; it will just alert you to that fact and allow you to start the process of restoring your credit. One way to try and prevent financial identity fraud or theft is to place a fraud alert on your credit file, which is free. You only need to do this with one of the three credit bureaus as they will notify the others. This will alert the credit bureaus to contact you for verification if anyone applies for credit under your name. Fraud alerts need to be renewed every 90 days.

Financial Identify Theft Crime Examples

Published on: June 21, 2008 | by Lasnetski Gihon Law

Financial identity theft crimes are becoming more common in Florida as people resort to using less cash in favor of credit and debit cards. The following are a couple examples of increasingly common ways people are committing financial identity fraud to obtain the names and numbers on credit and debit card accounts so they can be later used without the cardholder’s authorization.

One method of financial identity fraud is referred to as key logging. It can happen in two primary ways. First, a person will attach a device to a computer through the keyboard port that can document a person’s key strokes when the computer is used. For instance, an offender may attach the device to a computer at a public library. When a victim uses the computer and types information on the keyboard, the offender can come back and remove the device and determine what keys the victim hit while using the computer. Alternatively, software is available that can serve the same purpose. After visiting a certain website, opening an email or getting a computer virus, a computer may acquire software that records a person’s keystrokes and sends the information to another location to be accessed by an offender.

Another method used to commit financial identity fraud is called skimming. This occurs when the offender uses a device that records the information on the magnetic strip on a credit or debit card as well as the information entered on the keypad. The device can be used in places where people swipe their credit or debit cards, such as ATM machines, gas station pumps and other such terminals. It can also be done in the various situations where a person gives a waiter, retailer or other vendor a credit card to be swiped and returned to the customer.

Florida Man Charged with Fraud for Allegedly Lying During Job Application Process

Published on: June 19, 2008 | by Lasnetski Gihon Law

Federal criminal charges were brought against a Florida man who allegedly attempted to obtain a high paying job with forged documents and false information, according to an article at www.Reuters.com. The Florida suspect has been charged with three counts of wire fraud by federal prosecutors after allegedly sending fraudulent documents to a company performing a background check on behalf of the company to which he applied for a job. The fraudulent documents were related to an SEC investigation that the suspect claimed was no longer ongoing. According to federal prosecutors, the suspect created a fake email from the SEC indicating that he cooperated with their investigation and provided valuable information. Federal prosecutors also allege that the suspect claimed that he was the vice president of finance for a Fortune 500 company, although he had been previously fired from that job.

The federal crime of wire fraud refers to any use of interstate wire communications to commit a fraudulent scheme to obtain money or other property. The use of wires encompasses telephone, radio, television and computer networks. Without knowing more about the facts of this case, the allegations of wire fraud likely involve an attempt to obtain money via a well paying job by using email and/or the telephone to transmit fraudulent information. If he is convicted of the wire fraud counts, he faces a maximum of 20 years in prison and a $250,000 fine.

Fewer Federal White Collar Crimes Prosecuted Under Bush Administration

Published on: May 30, 2008 | by Lasnetski Gihon Law

There has been a clear trend of fewer white collar crime cases being prosecuted in federal court over the last seven years under the Bush administration, according to an analysis done by the Transactional Records Access Clearinghouse (TRAC) which reviewed the records of thousands of federal criminal cases. TRAC also concludes that this trend will continue at least until 2009, when the new administration takes over.

Some of the statistics showing the decreasing number of white collar crimes pursued by federal prosecutors include: the prosecution of all federal white collar crimes is down 27% since 2000; there are about half the number of federal charges against organized crime suspects than there were in 2000; the prosecution of federal drug cases is down 20% from ten years ago; and the prosecution of federal weapons cases is down 21% since 2004. According to the study, only federal immigration crimes have seen an increase in federal prosecutions since 2000 (a 127% increase). Based on changes in staffing and budgeting of funds, the study concluded that this trend is likely to continue.

The TRAC study is consistent with an article written in August of last year on www.Seattlepi.com which discussed the number of white collar crimes which had not been prosecuted by the federal government. That article noted that approximately 2400 federal agents were transferred from various criminal divisions to handle counter-terrorism matters after 9/11. They have not since been replaced. After a six month investigation, Seattle PI concluded that the number of criminal cases investigated by the FBI declined by 34% from 2000 to 2005 and white collar crime cases referred from the FBI to federal prosecutors went from about 10,000 in 2000 to 3,500 in 2005.

Long Federal Prison Sentence for Manager of Popular Bands, But With Incentives

Published on: May 28, 2008 | by Lasnetski Gihon Law

Lou Pearlman was the creator of two of the most famous young bands (The Backstreet Boys and N’Sync), but he was recently sentenced to 25 years in prison after being convicted of the federal crimes conspiracy, money laundering and making false statements, according to the Orlando Sentinel. Pearlman defrauded more than 1,000 people and banks out of approximately $500 million. The prison sentenced ordered by the U.S. District Court Judge in Orlando, Florida was agreed to by federal prosecutors. Pearlman would normally serve 85% of his prison sentence, however the judge did give Pearlman an opportunity to reduce his sentence by one month for every million dollars he returns to the victims of his crimes.

The federal crimes Pearlman committed were part of what is commonly called a Ponzi scheme. A Ponzi scheme occurs when someone, presumably a good communicator and seemingly savvy businessperson or investor, makes claims that he/she can make excessively high financial returns for potential investors. The Ponzi schemer is typically someone who appears to have a lot of money giving the impression that he/she can do for others what he/she has already done for him/herself. Once a few victims are attracted to the scheme and pay their initial investments, the offender typically pays part of the promised profits to some of the initial investors. This serves the purpose of gaining trust and also generates some third party advertising.

However, the problem, and the crime, is that there are no high yield investments. The initial money that was returned to investors 1, 2 and 3 as profits are really the initial “investment money” that was paid to the Ponzi schemer by investors, or victims, 4, 5 and 6. So, going forward, initial victims are paid periodically from the funds of subsequent victims. Ponzi schemes while effective initially, depending on the skill of the person running it, are generally destined to fail. The obvious flaw is that victims are going to eventually want their money back plus the promised profits. As the Ponzi schemer runs out of new investors, or victims, he/she also runs out of money to pay his investors since there were never any real investments or legitimate source of profits. Ultimately, the victims will figure out the scheme and talk to other victims as well as the police. At that point, the Ponzi scheme collapses and often, unfortunately, the victims find that the money they thought they invested is gone.

Encrypted Financial and Identification Data May Not be as Secure as Businesses Think

Published on: May 21, 2008 | by Lasnetski Gihon Law

Criminal activity relating to stealing financial and identification information from the computer systems of individuals and businesses is increasing as the internet becomes more popular and people become more technologically advanced. Network security companies sell encryption software that presumably allows individuals and companies to protect the financial and identification information they keep on their computers and networks. However, a group of researchers from Princeton University recently exposed a basic flaw that would allow someone to steal encrypted information that is stored on computers. The method the researchers used was as simple as shooting cold air onto the computer memory chip with a can of dust remover which can be purchased at any hardware store. When the computer memory chip is hit with the cold air, the data on the chip is frozen for a period of time allowing the person to retrieve the information on the memory chip.

What does this mean for businesses in Jacksonville and elsewhere in Florida? The Florida data breach law requires companies whose computer security systems have been breached to notify any individual whose personal information has been materially compromised. In other words, any company that maintains personal information about an individual must notify that individual if the company’s computer system has been compromised such that the data breach likely has resulted, or likely will result, in harm to the individual. For more information about the Florida data breach law and notification requirements, please visit the discussion of this subject on our website.

There is an exception to the notification requirement in the Florida data breach law. If the personal information kept by the company was encrypted, the company does not have to notify any individuals of the data breach. However, as this study suggests, although encrypting information may remove a company from the notification requirement of the law, it does not necessarily mean that data is safe and a data breach is still possible which can subject a company to serious financial ramifications and horrible publicity.

Avoiding Copyright Infringement

Published on: May 8, 2008 | by Lasnetski Gihon Law

US-Cert and the United States Copyright Office have published information about the crime of copyright infringement and how to avoid committing and being prosecuted for that crime. The article can be located here.

Downloading music or movies without authorization and stealing software are obvious examples of copyright infringement crimes. However, this article along with the www.SecureFlorida.org website can help people identify and avoid other less obvious instances of copyright infringement.

Jacksonville, Florida Area Assisted Living Facility Owner Arrested for Medicaid Fraud

Published on: April 27, 2008 | by Lasnetski Gihon Law

A Jacksonville, Florida owner of an assisted living facility (Adams Adult Family Care Home) was arrested last week for allegedly committing medicaid fraud. According to Florida Attorney General Bill McCollum, the Jacksonville assisted living facility owner submitted false claims in excess of $20,000 to the Florida Medicaid program and was arrested by the Attorney General’s Medicaid Fraud Control Unit. The assisted living facility owner is suspected of running the facility without the proper license. More specifically, the facility was only licensed to care for four adult residents, but the facility owner is suspected of having more than four residents, including child residents, and charging the Florida Medicaid program for 19 months of reimbursements for the unauthorized residents.

According to the State Medicaid Fraud Control Units most recent annual report covering fiscal year 2006 issued by the Department of Health and Human Services Office of Inspector General, the various state Medicaid Fraud Control Units (MFCU) were created to investigate and prosecute Medicaid fraud and patient abuse and neglect. In 2006, the various MFCU’s recovered more than $1.1 billion and obtained 1,226 criminal convictions pursuant to their investigations and prosecutions.

Medicaid is a federal program, but Florida, like each other state, is authorized to administer the program and set certain standards in terms of eligibility and reimbursements. Generally, medical providers and assisted living facilities that are enrolled in the Medicaid program can provide care and treatment to individuals and make a claim for reimbursement to the Florida Medicaid program. Medicaid fraud is often characterized by a situation where a provider enrolled in the Florida Medicaid program will submit a false claim for reimbursement for: services that were not actually rendered to residents or patients, services that were not necessary or not authorized under the program, medical equipment not provided to the patient or resident or amounts greater than the appropriate value of the service.