McHenry County Blog

The U.S. Attorney’s Office has come up with another financial crimes victory. You can read about it below:

FORMER CHAIRMAN OF FAILED WESTERN SPRINGS BANK PLEADS GUILTY TO CONCEALING PERSONAL INTEREST IN LOANS FROM U.S. REGULATORS

CHICAGO — The chairman of a failed west suburban bank pleaded guilty today to engaging in a scheme involving making false statements in regulatory documents regarding his undisclosed personal interest in loans that resulted in the bank losing more than $680,000.

The defendant, James A. Regas, who was chairman of the board of directors of the former Western Springs National Bank & Trust, admitted that he falsified and concealed material facts that should have been fully disclosed to the bank’s directors and government regulators during 2008 and 2009.

The bank’s two branches were closed by federal regulators in April 2011, and its assets were purchased by Heartland Bank and Trust Company, which assumed approximately $182 million in deposits.

Regas, 82, of Oak Brook, was charged with one count of scheming to make false statements in a criminal information that was filed on June 19.

He pleaded guilty today at his arraignment before U.S. District Judge Gary Feinerman in Federal Court in Chicago.

Sentencing was scheduled for Oct. 25, 2012. Regas faces a maximum penalty of five years in prison and a $250,000 fine, and he has agreed to pay full restitution.

According to his plea agreement, Regas caused bank employees to file false quarterly Reports of Condition and Income, also known as a “Call Report,” with the Federal Deposit Insurance Corp., and he signed the reports knowing they contained false information regarding the delinquency status of certain loans.

Regas admitted that between 2004 and 2009 he referred business associates to Western Springs for loans, without disclosing to the bank that he had financial partnerships with such business associates and that he intended to benefit from the loans.

Regas knowingly submitted false conflict-of-interest statements to the bank, in which he denied having any financial relationship with any of the bank’s borrowers.

Among the loans from which Regas benefitted, directly or indirectly, without the knowledge and approval of disinterested bank directors, were:

• an $803,000 loan to North Park Webster LLC in December 2004, which was used partially to finance the purchase of three properties in Evanston — 917 Edgemere Ct.; 925 Edgemere Ct.; and 1216 North Sheridan Rd., in which Regas and family members had financial interests;
• a $500,000 loan to one of Regas’ associates in November 2005, from which Regas received approximately half of the proceeds indirectly through a third-party; and
• a $750,000 loan to a certain real estate investor in September 2008 to finance the investor’s purchase of an apartment building at 814-816 Mulford St., in Evanston, from Regas. That building served as collateral for the bank on another loan that Regas acquired and sold through a nominee company.

These loans enabled Regas to use bank funds for his own benefit without having to apply for loans himself, posting collateral, or signing any promises to repay the bank’s money, while evading federal restrictions on insider loans.

Because the loans were not fully repaid, Western Springs suffered a loss of approximately $681,617, according to the plea agreement.

The guilty plea was announced by Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois, and Robert D. Grant, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

The government is being represented by Assistant U.S. Attorneys Brian Havey and Andrianna Kastanek.

The prosecution falls under the umbrella of the Financial Fraud Enforcement Task Force, which includes representatives from a broad range of federal agencies, regulatory authorities, inspectors general, and state and local law enforcement who, working together, bring to bear a powerful array of criminal and civil enforcement resources. The task force is working to improve efforts across the federal executive branch, and with state and local partners, to investigate and prosecute significant financial crimes, ensure just and effective punishment for those who perpetrate financial crimes, combat discrimination in the lending and financial markets, and recover proceeds for victims of financial crimes. For more information on the task force, visit: www.StopFraud.gov

Four years after his 2008 interview, a physician was indicted for income tax evasion and mail fraud according to the following press release from the U.S. Attorney’s Office.

The Chicago Tribune explains his connection to our crooked former Governor Rod Blagojevich:

“Raghuveer Nayak, a former fundraiser for U.S. Jesse Jackson Jr.and Rod Blagojevich and a key figure in the U.S. Senate seat scandal, was arrested at his Oak Brook home this morning and charged with bribing doctors to send patients to his surgery centers.”

RAGHUVEER NAYAK, OWNER OF AREA SURGERY CENTERS, CHARGED WITH FRAUD AND TAX OFFENSES FOR ALLEGEDLY PAYING PHYSICIANS HUNDREDS OF THOUSANDS OF DOLLARS IN BRIBES FOR PATIENT REFERRALS

CHICAGO — The owner of multiple area outpatient surgery centers was arrested today on federal fraud and tax charges alleging that he paid bribes and kickbacks to physicians for patient referrals and filed false federal income tax returns that understated his income.

The defendant, Raghuveer Nayak, was charged in a 19-count indictment that was returned by a federal grand jury last week and unsealed today following his arrest, announced Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois; Robert D. Grant, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation; and Thomas Jankowski, Acting Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division.

Nayak, 57, of Oak Brook, is scheduled to appear at 11:00 a.m. today before Magistrate Judge Maria Valdez in U.S. District Court.

He was charged with 10 counts of mail fraud, five counts of interstate travel in aid of racketeering, and four counts of filing false income tax returns for the years 2005-08.

The indictment seeks forfeiture of at least $1.8 million in alleged fraud proceeds, or substitute assets, including

• Nayak’s Oak Brook residence
• the Rogers Park One Day Surgery Center, Inc., located at 7616 North Paulina St.
• the Lakeshore Surgery Center LLC, located at 7200 North Western Ave.

In addition to those two facilities, Nayak owned and/or controlled the following health care-related businesses in Illinois and Indiana:

• Lakeside Surgery Center LLC
• Merillville Plaza Surgery Center LLC
• Lincoln Park Open MRI
• Delaware Place MRI LLC
• Paulina Anesthesia, Inc.
• Illiana Anesthesia
• Western Touhy Anesthesia, Inc.
• Division Medical Diagnostics, Inc.,

according to the indictment.

Nayak’s facilities did not accept patients covered public health insurance programs, such as Medicare and Medicaid, and instead accepted patients insured by private health insurers, such as Blue Cross Blue Shield, or patients who agreed to pay the entire fee themselves. Private insurers treated Nayak’s facilities as “out-of-network” when paying bills submitted for patient services.

Between 2000 and December 2010, Nayak allegedly defrauded patients by paying and arranging to pay bribes and kickbacks in the form of cash and other hidden payments to physicians who would refer their patients to Nayak’s facilities for medical treatment.

Nayak paid hundreds of thousands of dollars to different physicians in exchange for patient referrals, the charges allege, adding that the physicians deceived their patients by not disclosing that they were being paid for making referrals to Nayak’s facilities.

At times, the indictment alleges that Nayak paid bribes and kickbacks to physicians to begin referring patients, while at other times he did so to ensure that they continued to refer patients to his facilities.

He allegedly offered to pay physicians a set amount of money for each patient referral.

Nayak allegedly concealed and attempted to conceal the scheme by making payments in cash, disguising the payments as advertising, or by disguising the true purpose of the payments through fraudulent agreements and contracts, including contracts purporting to pay physicians for performing services that Nayak knew they had not provided.

Between 2002 and December 2008, Nayak allegedly obtained cash to pay bribes and kickbacks by giving Individual A more than $2 million in checks drawn on his facilities’ accounts and, in exchange, at Nayak’s direction, Individual A gave Nayak cash equaling approximately 70 percent of the value of the checks.

Nayak allegedly indicated to his tax preparer that the checks to Individual A were for advertising and should be treated as a business expense on tax returns for Nayak and his facilities.

After he was interviewed by law enforcement agents in December 2008, Nayak allegedly took additional steps to hide the scheme by executing fraudulent contracts and by warning physicians not to speak with agents about the payments.

The tax counts allege that Nayak caused the preparation of false individual federal income tax returns that understated his true income because he claimed that the checks to Individual A should be treated as advertising expenses when he knew they were not.

As a result, Nayak allegedly understated his gross income when he reported the following amounts:

• $4,643,916 for 2005
• $6,471,865 for 2006
• $5,791,109 for 2007
• $9,362,647 for 2008

Each count of mail fraud carries a maximum penalty of 20 years in prison and a maximum fine of $250,000, or an alternate fine totaling twice the loss or twice the gain, whichever is greater, as well as mandatory restitution. Interstate travel in aid of racketeering carries a maximum prison term of five years and a $250,000 fine on each count, and each count of filing a false income tax return carries a three-year maximum prison term and a $250,000 fine. In addition, defendants convicted of tax offenses must pay the costs of prosecution and remain liable for any and all back taxes, as well as a potential civil fraud penalty of 75 percent of the underpayment plus interest. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The government is being represented by Assistant U.S. Attorneys Carrie Hamilton and Andrianna Kastanek.

The public is reminded that an indictment is not evidence of guilt. The defendant is presumed innocent and is entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.

A press release from the U.S. Attorney’s Office:

FIFTEEN DEFENDANTS INDICTED FOR ALLEGED ROLES IN SCHEME TO USE MORE THAN 80 FICTITIOUS COMPANIES TO DEFRAUD ILLINOIS, INDIANA AND MINNESOTA UNEMPLOYMENT INSURANCE AGENCIES OF $8.7 MILLION

CHICAGO — A suburban Chicago woman who owned a south side tax preparation business allegedly schemed to falsely claim more than $1 million in federal tax refunds and, together with 14 co-defendants, allegedly engaged in a related scheme using other individuals’ identities, including some tax service clients and some stolen, to fraudulently obtain more than $8.7 million from state unemployment insurance agencies in Illinois, Indiana and Minnesota.

The defendants allegedly registered approximately 80 fictitious employers with the states’ unemployment insurance agencies and used the sham employers to fraudulently collect unemployment insurance benefits. The Illinois Department of Employment Security was allegedly defrauded of at least $5.95 million; the Indiana Department of Workforce Development was allegedly cheated of at least $2.4 million, and the Minnesota Department of Employment and Economic Development lost at least $342,000 as a result of the alleged fraud scheme.

The lead defendant, Jacqueline Kennedy, owned and managed

• ATAP Financial Enterprises, Inc.,
• ATAP Tax & Business Solutions, Inc., and
• ATAP Tax Services, Inc., (collectively ATAP),

all tax preparation businesses located at one time at 1757 West 95th St., in Chicago.

Kennedy, 39, of Country Club Hills, was charged with

• 14 counts of mail and wire fraud,
• six counts of filing false claims for tax refunds, and
• one count of aggravated identity theft.

Kennedy and 14 co-defendants were indicted together on various tax, fraud and identity theft charges in a 60-count indictment returned yesterday by a federal grand jury, Patrick J. Fitzgerald, United States Attorney for the Northern District of Illinois, announced today. All 15 defendants will be ordered to appear for arraignment at a later date in U.S. District Court in Chicago.

“This indictment highlights the determination of the Labor Department’s Office of Inspector General to investigate fraud against the unemployment insurance program.

“The defendants allegedly schemed to illegally obtain approximately $8.7 million in unemployment benefits.

“We will continue to work with our law enforcement partners and our colleagues in the Illinois, Indiana, and Minnesota state workforce agencies to aggressively investigate allegations of fraudulent activities to obtain unemployment insurance benefits,” said James Vanderberg, Special Agent-in-Charge of the Chicago Regional Office of the U.S. Department of Labor, Office of Inspector General, Office of Labor Racketeering and Fraud Investigations.

Mr. Fitzgerald and Mr. Vanderberg announced the charges with Alvin Patton, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division; Robert D. Grant, Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation; and Thomas P. Brady, Inspector-in-Charge of the U.S. Postal Inspection Service in Chicago. The Social Security Administration Office of Inspector General also assisted in the investigation.

Between January 2008 and April 2010, the indictment alleges that Kennedy and others prepared at least 200 false individual federal income tax returns for clients of ATAP or in the names of clients stating false income and credits for tax years 2007-09 and fraudulently claiming approximately $1.025 million in tax refunds.

Kennedy allegedly inflated certain ATAP clients’ tax refunds by manufacturing false Forms W-2 from companies for which the clients did not work and from companies for which the clients worked but did not earn the inflated wages reported.

As part of the alleged unemployment insurance fraud scheme, Kennedy and others allegedly used personal identifying information of numerous individuals, both ATAP tax clients, including names, social security numbers, and dates of birth, to file retroactive wage reports and subsequent claims for benefits, according to the indictment.

At times, Kennedy and others stole the identities of ATAP clients and others and used the identifiers to file fraudulent claims for unemployment insurance benefits.

At other times, they agreed with ATAP clients and others to file fraudulent claims on their behalf in exchange for a share of the proceeds, the indictment alleges.

Kennedy and co-defendant Tara Cox, 32, of Blue Island, who was charged with 15 counts of mail and wire fraud and one count of aggravated identity theft, allegedly created the 80-some fictitious companies and registered them with the state unemployment agencies, knowing that the vast majority of employers existed only for the purpose of drawing unemployment insurance benefits on behalf of purported employees.

According to the indictment, they allegedly filed false quarterly wage reports on behalf of these fictitious employers, knowing that these companies, in fact, did not employ any workers. Kennedy and Cox then filed or caused others to file fraudulent claims for unemployment insurance benefits by claiming to be employees of the fictitious companies who were terminated without fault.

During the course of the alleged scheme between February 2009 and October 2011, Kennedy, Cox and others allegedly filed at least 900 false unemployment insurance claims before the scheme was detected and payments were stopped.

In Illinois and Minnesota, unemployment insurance claimants could chose to have their benefits directly deposited into a bank account or have the state agency issue them a debit card, while Indiana claimants received a debit card through the mail.

The indictment alleges that Kennedy and Cox caused fraudulent unemployment insurance payments to be made to debit cards for the benefit of themselves and the following co-defendants:

• Cox’s mother, Rowena Pughsley, 60, also of Blue Island, charged with six counts of mail fraud, one count of aggravated identity theft, and two counts of filing false income tax returns;
• April Blanchard, 37, of Chicago, charged with 10 counts of mail and wire fraud;
• Orvin Hurst, 35, of Chicago, charged with nine counts of mail and wire fraud;
• Marcel Mason, 38, whose last known address was in Beecher, charged with four counts of mail and wire fraud;
• Lantz Roberts, 39, of Chicago, charged with four counts of mail fraud;
• Jocklyn Batey, 64, of Chicago, charged with two counts of mail fraud;
• Shawn Ray, 49, of Chicago, charged with two counts of mail fraud;
• Ashlee Petermon, 25, of Chicago, charged with one count of mail fraud;
• Eboni Coppage, 26, of Bloomington, charged with two counts of mail fraud;
• Tameka Thompson, 31, of Park Forest, charged with one count of mail fraud;
• Charles Williams, 37, of Sauk Village, charged with two counts of mail and wire fraud; and
• Anise McGill, 26, of Alsip, charged with one count of mail fraud.

At times, Kennedy, Cox, Pughsley and Blanchard allegedly paid or caused to be paid unemployment payroll tax contributions on behalf of the fictitious employers to create the false impression that the employers were legitimate businesses with actual employees.

In addition, Cox and others allegedly purchased social security numbers for filing bogus claims for unemployment insurance benefits.

Ten of the defendants, including Orvin Hurst’s brother, Marlin Hurst, 39, of Chicago, who was charged with five counts of mail fraud, caused unemployment insurance debit cards to be delivered to their home and other addresses with which they were associated, knowing that the cards were fraudulently obtained, the indictment alleges.

Fourteen of the defendants allegedly withdrew funds from bank automated teller machines using unemployment insurance debit cards in the names of purported employees of fictitious employers knowing they were not entitled to those funds.

Kennedy, Pughsley, Cox, Blanchard, Mason and others allegedly falsely certified fraudulent unemployment insurance claims, including representing to the state agencies that the claimants were entitled to unemployment insurance benefits, had been available and able to work, and actively sought work during the certification period.

Pughsley alone was charged with two counts of filing false individual federal income tax returns for 2009 and 2010, for allegedly under-reporting her total income as $196,414 in 2009 and $70,538 in 2010, when she knew that her gross income and total income were substantially greater.

The indictment seeks forfeiture of approximately $8.7 million in alleged fraud proceeds from Kennedy, Cox, Pughsley and seven other defendants.

The charges in the indictment carry the following maximum penalties on each count: mail and wire fraud — 20 years in prison; filing false claims for tax refunds — five years; aggravated identity theft — mandatory two years consecutive to any other sentence imposed, and a maximum fine of $250,000 on each count, or an alternate fine on the fraud counts totaling twice the loss or twice the gain, whichever is greater.

In addition, restitution is mandatory.

count of filing a false income tax return carries a three-year maximum sentence, and a $250,000 fine. In addition, defendants convicted of tax offenses must pay the costs of prosecution and remain liable for any and all back taxes, as well as a potential civil fraud penalty of 75 percent of the underpayment plus interest. If convicted, the Court must impose a reasonable sentence under federal statutes and the advisory United States Sentencing Guidelines.

The government is being represented by Assistant U.S. Attorneys Andrianna D. Kastanek and Mark E. Schneider.

The public is reminded that an indictment is not evidence of guilt. The defendants are presumed innocent and are entitled to a fair trial at which the government has the burden of proving guilt beyond a reasonable doubt.