McHenry County Blog

In an interview with Craig Dellimore with WMMB-Radio, U.S. Senator Mark Kirk indicated that he would be willing to vote to allow state government in Illinois to declare bankruptcy:

“Between a bailout, which has no possibility of passing in the House, and a default, which means suddenly, the state treasury runs out of money to pay for anything, is there something that allows a state to work out its debt situation?”

That beats a Federal bailout, which Kirk said could not pass the U.S. House, and default.

“Bankruptcy would allow the state to restructure its pension system so that it may preserve benefits for existing employees,” the WBBM story concludes.

No one at the Crystal Lake Town Hall Meeting Saturday afternoon at McHenry County College brought up the question.

So you tell your employer to put some of your money in a health care expense (or salary reduction) account so you can pay medical bills with tax free money.

You better hope that your employer didn’t hire an outfit called Canopy Financial because the canopy has collapsed.

Here’s the U.S. Attorney’s press release on guilty pleas from two of its officers:

FORMER CANOPY FINANCIAL CO-FOUNDER PLEADS GUILTY TO $75 MILLION INVESTMENT FRAUD AND $18 MILLION MISAPPROPRIATION FROM CUSTODIAL HEATH CARE EXPENSE ACCOUNTS OF 1,600 CUSTOMERS

CHICAGO — A co-founder of Canopy Financial, Inc., a bankrupt health care transaction software company based here, pleaded guilty today to defrauding investors and clients of more than $93 million.

The defendant, Jeremy Blackburn, Canopy’s former president and chief operating officer, admitted his role in a fraud scheme that cheated investors of approximately $75 million, while at the same time misappropriating more than $18 million from customer accounts intended for health care savings and expenses.

Patrick Fitzgerald

Blackburn pleaded guilty to one count of wire fraud in U.S. District Court, 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 the Federal Bureau of Investigation; and
• James Vanderberg, Special Agent-in-Charge of the U.S. Department of Labor Office of Inspector General in Chicago.

Blackburn, 37, of Bolingbrook, remains free on a $1 million bond pending sentencing, which was scheduled for March 8, 2011, by U.S. District Judge Ruben Castillo.

His plea agreement contemplates a federal sentencing guideline range of 188-235 months in prison, and he faces a maximum penalty of 20 years in prison and a $250,000 fine. The Court also must order restitution and Blackburn agreed to a forfeiture judgment in the amount of $93,125,918.

A second defendant, Anthony Banas, 33, of Homer Glen, Canopy’s chief technology officer, pleaded guilty to wire fraud in September and is scheduled to be sentenced on March 30, 2011.

According to Blackburn’s plea agreement, both he and Banas used false information about Canopy’s financial condition, including a bogus auditor’s report and falsified bank statements, to fraudulently obtain approximately $75 million from several private equity investors in 2009.

Approximately $39 million of that money was used to redeem shares of other Canopy investors, including approximately $1.6 million that went to Blackburn and $975,000 that went to Banas, while another $29 million obtained from investors was deposited into Canopy operating accounts.

Blackburn and Banas also misappropriated Canopy operating funds for their own benefit.

Blackburn alone took approximately $6 million in unauthorized withdrawals and transfers from Canopy bank accounts during 2009. Blackburn generally directed a Canopy employee, or occasionally Banas, to make the funds transfers to his bank accounts, or to pay for his personal expenses, such as

• credit card balances,
• luxury car purchases, and
• funding his account with a private jet company.

Among Blackburn’s luxury car purchases with Canopy funds were the following:

• two 2010 Range Rover SUVs,
• a 2009 Bentley,
• a 2008 Lamborghini,
• a 2010 Lamborghini,
• a 2009 Rolls Royce Phantom,
• a 2009 Aston Martin DBS,
• a 2009 Bentley Continental, and
• a 2009 Ferrari 430.

Blackburn also

• paid for personal home renovations,
• bought sports tickets and
• purchased jewelry and watches

using misappropriated Canopy funds.

Blackburn admitted that he created phony bank statements during 2009 to conceal the transfer of more than $18 million from special health care accounts in which Canopy held funds as custodian for the benefit of more than 1,600 clients and customers to make payments to medical providers.

The funds were transferred to Canopy’s own operating accounts, as well as to benefit Blackburn and Banas personally.

In 2004, Blackburn, Banas and a third individual co-founded Canopy, which reportedly was one of the country’s fastest-growing privately-held companies before it entered bankruptcy proceedings in November 2009.

At that time, a special committee of outside directors reported information to federal law enforcement officials and continues to cooperate with the ongoing investigation, officials said.

A civil enforcement action filed by the U.S. Securities and Exchange Commission against Canopy remains pending and law enforcement officials noted the ongoing cooperation of the SEC’s Chicago Regional Office.

Canopy, which had offices in Chicago, Plainsboro, N.J., and San Francisco, developed and marketed software programs for banks and health care payers to administer and process payments involving health-related savings and spending accounts. Canopy’s products related to expense tracking, online bill payment and claims processing for healthcare transactions.

According to Blackburn’s plea agreement, in late 2008 and early 2009, Canopy’s CEO and Blackburn discussed a proposal sell Canopy.

The Canopy CEO encouraged Blackburn to present the company’s board of directors with a bleak forecast of its performance, and they discussed the possibility of soliciting investors to provide capital for Canopy.

The Canopy CEO also encouraged Blackburn to prepare optimistic financial statements to be provided, with the assistance of an investment banker, to prospective investors to induce investment in Canopy.

Blackburn then prepared false monthly operating reports inflating Canopy’s revenue and distributed them to others knowing they would be used to solicit investors. Beginning in March 2009, in connection with the offer and sale of Series D preferred stock by Canopy, Blackburn and Banas made materially false representations to prospective investors about canopy’s financial condition, including its revenues, profitability and total number of client accounts, and falsely represented to prospective investors that its financial statements had been audited by KPMG, the international network of audit, tax and consulting firms.

In addition to the phony audit report, Blackburn and Banas created falsified bank statements for the months of January through June 2009, purporting to show a Canopy account at Northern Trust Bank with monthly balances ranging between $5.7 million and $8.9 million. Blackburn admitted that these misrepresentations caused certain investors, including entities affiliated with Spectrum Equity Investors, to invest a total of nearly $75 million in shares of Canopy preferred stock in July and August 2009.

The government is being represented by Assistant U.S. Attorneys Stephanie Zimdahl and Manish Shah.

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.

McHenry County just keeps making Chicago news.

Tribune subscribers awoke to this article on the front page.

Today on the front page of the Chicago Tribune is an article about former Metra Executive Director Phil Pagano’s wife’s having filed for bankruptcy.

Back in September.

In Rockford.

Pagano apparently left his family in dire straits.

The Covered Bridge Trail’s home is worth $340,000, but has a mortgage of $765,000.

Another $265,000 in debts are enumerated in the bankruptcy petition, the Tribune says.

And the question remains, what did the Republican appointee do with his generous salary and all the money he took under dubious terms from Metra before he came under investigation and committed suicide in front of a train near Hillside Road in rural Crystal Lake.

While the case was initiated in September, the reporter writes the first hearing was yesterday in Rockford.

Quoted in the article is James Sotos, the attorney who investigated Pagano at the request of Metra.  He is the same man representing Sheriff Keith Nygren in the wrongful termination case brought by Nyrgen’s GOP primary opponent Zane Seipler.

Trunberry Country Club in Lakewood, Illinois

The Turnberry Country Club is having financial problems. That’s been rumored for quite a while.

But the club did not declare bankruptcy.

The ownership is in transition says Lakewood Village President Erin Smith. Her husband Mike was the last president of the not-for-profit organization, a non-paid position.

Turnberry County Club's "Members Only" sign

And, probably a thankless job.

Village President Smith is

“confident the club will reopen in the spring.”“This is not the first time the ownership model has changed.

“Originally, the club was owned by the developer. Then, it changed into a member-owned club and now the ownership model is changing again.

“The rumor that the village will step in and purchase Turnberry County Club is without merit. The village is not in a financial position to do that.

“We can’t afford a clubhouse for the course we already own.”

Red Tail Golf Club Trailer Club House owned by the Village of Lakewood

“The difficulty stems strictly from dramatic loss of members,” Mike Smith said.

“In 2004, the equity membership was about 210. When we voted as a remaining membership to dissolve the not-for-profit organization in December, we had approximately forty equity members.“As a board our imperative was to make sure we met all our external obligations, which included both weddings and external holiday parties, as well as to make sure all the employees got paid what they were due.

“We accomplished that.

“I agreed to become the interim president to facilitate the orderly transition of ownership.

“The misinformation and the misunderstandings throughout the community never ceases to amaze me.

“The Village of Lakewood doesn’t owner or operate or subsidize any facet of Turnberry Country Club’s operations. It is a private entity, owned and operated and funded by its membership.”

Below is the letter that Village President Erin Smith has sent to her neighbors in the Turnberry Property Owners Association:

To My Neighbors in the Turnberry Property Owners Association,

Lakewood Village President is seen talking to constituents in a crowded Meridian Street home.

I know that many of you read the article in the Northwest Herald today regarding Turnberry Country Club, and I am sure that you probably have outstanding questions that were not adequately addressed.

As Village President, and as a neighbor that lives on the golf course, I want to reassure you that the Village Board and Village Staff are deeply committed to supporting the efforts of the appointed receiver in quickly and seamlessly transitioning the ownership of Turnberry Country Club.

Membership at Turnberry Country Club (TCC) declined significantly in this economy, and the number of equity members that remained was insufficient to support the existing cost structure of the club.

In response, the TCC Board of Directors dissolved the non-profit entity in order to facilitate an orderly transition of ownership.

The club did not declare bankruptcy and the remaining membership was committed to fulfilling outstanding obligations up to the point of transition.  Filing for receivership and appointing a receiver to manage the process was a necessary step in facilitating the transition of ownership.

Although I cannot make any guarantees or announcements regarding new ownership at this time, I can tell you that all parties involved are very optimistic that the club will reopen in the spring as it normally does.

I guarantee that our Village Board and Village Staff understand the significance of this club to your property values.

We have taken steps to ensure that all parties involved understand that Village ordinance requires that the property is properly maintained, and that our neighborhood covenants require that this property remains a private golf course.

There are many reasons to be optimistic about the future ownership model, and I look forward to the time when I can share more information with you.  In the meantime, I would encourage each of you to remain positive when talking with others about the future of the club.  This is the one thing that each of us can do in support of property values in our neighborhood.

If you have other questions that I have not addressed and that you believe I will be in a position to answer, please contact me at your convenience:  815-356-8005 or erin.smith.lakewood@gmail.com .

Sincerely,

Erin

My eleven-year old and a friend were playing a Wii game called

It’s one of those monsters versus people and buildings games where the players reek mayhem throughout a major city and, having conquered, move on to another.

My son picked a giant squid, named, would you believe,

When the street scene reached a building with the Chicago Tribune’s logo on it, he called me and I took this photo.

The game designer certainly could not have known the Chicago Tribune would go into bankruptcy.

My eleven-year old and a friend were playing a Wii game called

It’s one of those monsters versus people and buildings games where the players reek mayhem throughout a major city and, having conquered, move on to another.

My son picked a giant squid, named, would you believe,

When the street scene reached a building with the Chicago Tribune’s logo on it, he called me and I took this photo.

The game designer certainly could not have known the Chicago Tribune would go into bankruptcy.

Rumors are endemic to campaigning.

I remember when I was running for McHenry County Treasurer at age 23.

I was single, living at home, having just returned from a grueling job as a budget examiner at the U.S. Budget Bureau.

It was 1966, Vietnam War time.

So, why wasn’t I drafted?

My opponents started this rumor:

You know, there are only two reasons that a guy his age isn’t drafted. One is physical. He certainly looks healthy enough, knocking on all those doors and all.

The other reason is moral. You know he lives with his parents and doesn’t have a girl friend.

In short, I must be a homosexual.

A rumor impossible to refute. Nothing to do but continue campaigning.

For the record, I had a 1-Y deferment. It was physical, enough to keep me out of the Marine Reserves, but not out of the Marines, if I volunteered. (A story for another time.) I could have been drafted anytime that congress declared war, which it never did.

I understand similar rumors are being spread about at least one single young Republican candidate in Illinois this year.

8th congressional district GOP primary candidate Steve Greenberg is fighting a rumor campaign of a different nature.

He send out the following press release:

Setting the Record Straight
More Lies from the Morris Campaign

LAKE ZURICH 1/14/08— Eighth District GOP frontrunner Steve Greenberg has been the subject of lies spread by Kirk Morris’ desperate campaign and its surrogates.

Morris, his campaign and his campaign’s surrogates have spread utterly false rumors that Greenberg has been involved in business ventures that ended in bankruptcy. In fact, no company Greenberg has ever invested in or managed has ever declared bankruptcy.

Brad Goodman, Greenberg’s Campaign Manager, said,

“Steve Greenberg has spent his career creating hundreds of good paying jobs in Illinois. No company he has been involved with has ever filed bankruptcy, and he has also never filed personal bankruptcy of any kind.”

Goodman continued,

“Kirk Morris tells fairy tales. First, he told 2 editorial boards that he greatly influenced Rudy Giuliani’s immigration policy when he later admitted that all he really did was have his picture taken with the former New York City Mayor. Now, he’s lying about Steve Greenberg’s companies declaring bankruptcy. When will Morris’ lies stop?”

I talked to Greenberg and here’s what he told me,

“There’s a lot of fluff out there. They sure don’t let facts get in the way of a good story.

“For the last six years I’ve taken companies that are losing money and potentially leaving the market place, closing shop. We would acquire them, fix them up and create jobs that would not have been there otherwise.

“I have never had a business go bankrupt.

“We’ve had an 80% success rate on the turnarounds.”

He gave his brother the credit for the operating side of the business.

Bankruptcy seems to be something that someone could find if one looked for it. If anyone has any documentation, please send it to me.

Rumors are endemic to campaigning.

I remember when I was running for McHenry County Treasurer at age 23.

I was single, living at home, having just returned from a grueling job as a budget examiner at the U.S. Budget Bureau.

It was 1966, Vietnam War time.

So, why wasn’t I drafted?

My opponents started this rumor:

You know, there are only two reasons that a guy his age isn’t drafted. One is physical. He certainly looks healthy enough, knocking on all those doors and all.

The other reason is moral. You know he lives with his parents and doesn’t have a girl friend.

In short, I must be a homosexual.

A rumor impossible to refute. Nothing to do but continue campaigning.

For the record, I had a 1-Y deferment. It was physical, enough to keep me out of the Marine Reserves, but not out of the Marines, if I volunteered. (A story for another time.) I could have been drafted anytime that congress declared war, which it never did.

I understand similar rumors are being spread about at least one single young Republican candidate in Illinois this year.

8th congressional district GOP primary candidate Steve Greenberg is fighting a rumor campaign of a different nature.

He send out the following press release:

Setting the Record Straight
More Lies from the Morris Campaign

LAKE ZURICH 1/14/08— Eighth District GOP frontrunner Steve Greenberg has been the subject of lies spread by Kirk Morris’ desperate campaign and its surrogates.

Morris, his campaign and his campaign’s surrogates have spread utterly false rumors that Greenberg has been involved in business ventures that ended in bankruptcy. In fact, no company Greenberg has ever invested in or managed has ever declared bankruptcy.

Brad Goodman, Greenberg’s Campaign Manager, said,

“Steve Greenberg has spent his career creating hundreds of good paying jobs in Illinois. No company he has been involved with has ever filed bankruptcy, and he has also never filed personal bankruptcy of any kind.”

Goodman continued,

“Kirk Morris tells fairy tales. First, he told 2 editorial boards that he greatly influenced Rudy Giuliani’s immigration policy when he later admitted that all he really did was have his picture taken with the former New York City Mayor. Now, he’s lying about Steve Greenberg’s companies declaring bankruptcy. When will Morris’ lies stop?”

I talked to Greenberg and here’s what he told me,

“There’s a lot of fluff out there. They sure don’t let facts get in the way of a good story.

“For the last six years I’ve taken companies that are losing money and potentially leaving the market place, closing shop. We would acquire them, fix them up and create jobs that would not have been there otherwise.

“I have never had a business go bankrupt.

“We’ve had an 80% success rate on the turnarounds.”

He gave his brother the credit for the operating side of the business.

Bankruptcy seems to be something that someone could find if one looked for it. If anyone has any documentation, please send it to me.