McHenry County Blog

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

THREE FRAUD DEFENDANTS WHO MET IN PRISON SENT BACK TO SERVE NEW SENTENCES IN $3.6 MILLION PONZI SCHEME

CHICAGO — Three serial fraud defendants who met while incarcerated for unrelated crimes at the federal prison in Oxford, Wis., and then, after they were released, joined together in a Ponzi-type investment fraud scheme that caused approximately 100 victims to lose more than $3.6 million have been sentenced for their latest crimes.

Two of the defendants purported to run a business, Sundown Entertainment, Inc., that bought and sold films and comic-book rights and together raised more than $7 million from approximately 150 investors, while the third defendant entered the scheme later and lulled victims with false assurances about their investments.

U.S. District Court Judge Virginia Kendall last week sentenced

• DANIEL PARRILLI, 62, formerly of Carol Stream, to 70 months in prison, and
• finalized the sentencing of JOHN LAUER, 48, formerly of Chicago, who received a 31-month prison term.
• The lead defendant, CHRISTOPHER ANDERSEN, 57, formerly of Downers Grove, was sentenced last fall to 95 months in prison.

All three had pleaded guilty to fraud charges that were brought against them in 2010.

Parrilli was ordered to pay more than $3.65 million in restitution and to begin serving his sentence on Aug. 1. Lauer, was ordered to pay $457,367 in restitution and to surrender on June 12. Anderson, who is serving his sentence, was ordered to pay restitution totaling more than $3.7 million.

In connection with Parrilli and Andersen’s sentencings, the government argued that the fraud scheme “had a terrible impact on victims, who in many cases depleted their 401K funds or their college savings, or took out loans against their homes in order to invest with the defendants.”

Andersen had committed essentially the same crime previously when he was convicted in 2001 of offering and selling fraudulent investments in the form of promissory notes.

He continued to engage in additional fraud schemes while the charges were pending in both cases and even after he pleaded guilty in the Sundown case.

Parrilli had been imprisoned previously for bank fraud and fraudulently using aliases to obtain credit cards.

When they teamed-up in the Sundown Entertainment fraud scheme, they promised investors returns starting at 10 percent to as much as 150 percent over a period of months to as short as a few days.

Lauer joined Andersen and Parrilli after they had already fraudulently obtained most of the funds they raised from victims, and he provided lulling assurances to nervous victims that their investments were safe.

Lauer also admitted engaging in a separate investment fraud scheme involving the purported purchase of a surety bond to obtain the release of bank funds from the Cayman Islands.

Lauer at one time was the director of risk management and benefits for the Chicago Housing Authority when he engaged in a fraud scheme involving the fraudulent offer and sale of investments in so-called prime bank instruments that resulted in losses of more than $20 million, including about $15 million in CHA pension funds.

Lauer admitted engaging in multiple, separate fraud schemes and met Andersen and Parrilli while all three were serving their sentences at the Oxford prison.

Lauer was on supervised release when he assisted them in the later stages of the Sundown Ponzi scheme.

The sentences were announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The U.S. Securities and Exchange Commission assisted in the investigation.

The government was represented by Assistant U.S. Attorneys Edward Kohler and Shoshana Gillers.

The investigation 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.

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

CHICAGO INVESTMENT ADVISOR SENTENCED TO SIX YEARS IN PRISON FOR CAUSING CLIENTS TO LOSE $1.6 MILLION IN FRAUD SCHEME

CHICAGO — A former Chicago investment advisor was sentenced today to six years in federal prison for an investment fraud scheme that swindled clients, causing them to lose more than $1.6 million.

The defendant, DIMITRY VISHNEVETSKY, pleaded guilty last August to wire fraud and bank fraud, admitting that he misappropriated funds raised from investors for his own purposes, including to pay for such expenses as

• mortgage and
• car payments
• travel and
• vacations
• restaurant bills
• athletic club dues
• to make trades for himself

while using additional investor funds to make Ponzi-type payments to clients.

Vishnevetsky, 34, of Chicago, was ordered to pay $1,684,763 in restitution, nearly all of it to a half-dozen investment clients, by U.S. District Judge Ruben Castillo, who likened Vishnevetsky’s conduct to a financial storm that devastated the lives of his victims.

Vishnevetsky was ordered to begin serving his sentence on May 28.

“This offense was entirely unnecessary,” the government argued at sentencing.

“There was no good reason for this fraud, and the defendant, who was skilled in the world of finances could have gotten a legitimate job. In fact, [he] obtained a Bachelor’s degree in business administration, and attended the University of Oxford.”

According to the court records, Vishnevetsky offered and purported to sell investments, including investments in funds which promised to trade S&P Futures, and a fund that could trade in things such as equities, futures contracts, and commodities, as well as brokerage and management services for some investors, and promissory notes, through Hodges Trading, LLC, and Oxford Capital, LLC, which he controlled. Three purported Oxford funds existed in name only, as did the promissory notes, which Vishnevetsky described as London Interbank Offered Rate (LIBOR) adjusted notes.

Between September 2006 and March 2012, Vishnevetsky made false representations about the profitability of his prior and current trading, the use of the invested funds, the risks involved, the expected and actual returns on investments and trading, as well as false representations about the funds he purportedly traded.

For example, Vishnevetsky created and provided some investors fraudulent trading results showing profits as high as 36 percent per year. In fact, any trades that Vishnevetsky actually made consistently resulted in losses, not profits.

The bank fraud conviction resulted from false statements Vishnevetsky made between 2007 and 2010 to Merrill Lynch Bank & Trust concerning his income and assets to cause the bank to issue, and later modify, two loans totaling approximately $519,500 to purchase a condominium in Chicago.

The government is being represented by Assistant U.S. Attorney Jacqueline Stern.

The sentence was announced by Gary S. Shapiro, United States Attorney for the Northern District of Illinois, and Cory B. Nelson, Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The Commodity Futures Trading Commission, which filed a companion civil enforcement lawsuit, assisted in the investigation.

The investigation 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.

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

TWO WEST SUBURBAN MEN TO BE ARRAIGNED ON FEDERAL CHARGES IN $28 MILLION INVESTMENT FRAUD SCHEME

CHICAGO — Two west suburban men are scheduled to be arraigned Thursday on federal charges alleging that they and a third defendant, who is a fugitive, fraudulently obtained more than $28 million from approximately 120 investors, federal law enforcement officials announced today.

The defendants conducted estate planning seminars, aimed primarily at retirees in Illinois and California, and purported to sell promissory notes for investments in Turkish bonds to individuals with substantial savings.

Instead, through the operation of a Ponzi-type scheme, investor funds were used to pay other investors, to speculate in failed real estate and restaurant ventures and to make more than $2.5 million in payments to the defendants, their friends and family.

Robert C. Pribilski, 54, of Lisle, a principal of USA Retirement Management Services, which had offices in Oakbrook Terrace and southern California, and John T. Burns III, 53,of Naperville, a salesman for USA Retirement who conducted seminars, are scheduled to be arraigned at 9:30 a.m.

Thursday before U.S. District Judge Charles Kocoras in Federal Court in Chicago.

A third defendant, Mahmut Erhan Durmaz, also known as “Francois E. Durmaz,” 42, formerly of Streamwood and Los Angeles, also a principal of USA Retirement, fled the United States in March 2010 and is a fugitive believed to be residing in Turkey.

Pribilski and Durmaz were each charged with five counts of wire fraud and four counts of mail fraud in a nine-count indictment that was unsealed last week and announced today.

Burns was charged with three counts of wire fraud and three counts of mail fraud. The indictment also seeks forfeiture of $28 million from all three defendants.

The charges were announced by Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois, and William C. Monroe, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation. The U.S. Securities and Exchange Commission filed a civil enforcement action against Pribilski and Durmaz in March 2010 in Los Angeles. Durmaz fled the country the same day that a judge froze their personal and business assets.

According to the indictment, between 2005 and March 2010, the defendants offered and sold promissory notes that falsely represented USA Retirement “absolutely and unconditionally” promised to pay investors between 4.75 and 11 percent annually.

Pribilski and Durmaz falsely claimed that the interest would be generated from investments in Turkish bonds.

Instead, Pribilski and Durmaz operated a Ponzi-type scheme, using funds from the sale of promissory notes to make payments to other investors without disclosing that there were no Turkish bond investments.

In offering and selling USA Retirement promissory notes, all three defendants falsely told investors that they had many years of investment banking experience in the purchase and sale of Turkish bonds, and that they had personally profited from such investments through USA Retirement.

In fact, the defendants had no such banking experience and did not make any investments in Turkish bonds.

Pribilski and Durmaz allegedly used approximately $2.5 million of investor funds for their own benefit, including to pay for their

• homes,
• cars, and
• other expenses,

and to provide medical insurance and substantial salaries and bonuses to themselves and Burns.

Each count of wire and mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. The Court may also impose a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The government is being represented by Assistant U.S. Attorney Ryan S. Hedges.

The investigation 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.

An indictment contains only charges and 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.

Woodstock’s Francis X. Sanchez has been sentenced to 11 and a third years in Rockford Federal Court fraudulently obtaining $7 million from investors in his InvestForClosures business.

Sanchez admitted wrong-doing, which can be read in the press release from the U.S. Attorney’s Office below.

This is the case in which Sanchez promoted a Mexican resort called Sands of Gold.

In his scheme, he raised about $9 million, but only repaid $1.7 million.

Sanchez was ordered to pay back $7.8 million.

Here’s the U.S. Attorney’s press release:

McHENRY COUNTY BUSINESSMAN SENTENCED TO 11 YEARS IN PRISON FOR $7 MILLION FRAUD SCHEME

ROCKFORD — A Woodstock, Ill., man was sentenced today in federal court by U.S. District Judge Philip G. Reinhard in Rockford to 136 months in prison for conducting a $7 million fraud scheme. Francis X. Sanchez (“Sanchez”), 52, co-owned and operated a business in McHenry County, known as InvestForClosures.

On May 3, 2012, Sanchez pled guilty and admitted that he had fraudulently obtained more than $7 million from InvestForClosures’ investors.

According to Sanchez’s plea agreement, InvestForClosures purportedly bought distressed houses, rehabilitated those houses, and sold the houses for a profit. Sanchez admitted in his plea agreement that he solicited people to invest in InvestForClosures by making various misrepresentations, including:

1. their investments would be safe because they would be backed by real estate;
2. InvestForClosures used the majority of their investors’ funds to purchase real estate; and
3. because of the business’ efficient cash flow from buying and selling houses, InvestForClosures had never failed to make an interest payment on time or return an investor’s principal when requested.

These representations were false, because:

1. the business did not own sufficient real estate to secure all of the investments;
2. the business did not use the majority of investor funds to purchase real estate, but instead used most of the investors’ funds to pay other expenses, including the salaries of the defendants, and to pay Ponzi type interest to prior investors; and
3. InvestForClosures was not making enough money from property sales to pay the interest owed to the investors, but was instead using cash received from new investors to pay the prior investors with Ponzi type payments.

Sanchez further admitted that, in order to conceal from the investors his false promises and misrepresentations, and to prevent the investors from demanding the return of their principal, he told the investors that he was developing an exclusive, luxury, residential community in Mexico known as the “Sands of Gold.”

Sanchez solicited his investors to purchase lots at Sands of Gold and to invest additional monies for the Sands of Gold project.

Sanchez admitted that he made several misrepresentations to his investors regarding Sands of Gold, including:
the government of Mexico had promised to invest millions of dollars in infrastructure necessary for the development of the Sands of Gold;

1. efforts to obtain financing for the project were going well and a financing deal was imminent;
2. he was finishing negotiations with a major hotel chain for the construction of a hotel at Sands of Gold; and
3. a major accounting firm had agreed to do the accounting work necessary so that the business could go public.

During the course of the scheme, Sanchez fraudulently obtained more than $9 million from the investors.

Of this amount, approximately $1,711,711.18 was paid back to the investors through Ponzi type payments.

In addition to sentencing Sanchez to prison, the court also ordered him to pay more than $7.8 million in restitution to the victims of his crime.

Sanchez’s business partner and co-defendant, James D. Bourassa, 55, of Gilberts, Ill., pled guilty to mail fraud on February 27, 2012. Bourassa was sentenced on June 11, 2012, to 51 months in federal prison.

The case was investigated by the Rockford Office of the Federal Bureau of Investigation, the Chicago Office of the United States Postal Inspection Service, and the Illinois Secretary of State’s Securities Department. The investigation was conducted under the auspices 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.

The sentencing was announced by Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois; William C. Monroe, Acting Special Agent-in-Charge of the Chicago Office of Federal Bureau of Investigation; Thomas P. Brady, Postal Inspector-In-Charge of the Chicago Division of the U.S. Postal Inspection Service; and Illinois Secretary of State Jesse White.

The government was represented by Assistant U.S. Attorney Scott A. Verseman.

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

WILL COUNTY COUPLE SENTENCED TO FEDERAL PRISON TERMS FOR INVESTMENT FRAUD SCHEME THAT SWINDLED 40 VICTIMS OF $1 MILLION

CHICAGO — A Will County couple has been sentenced to federal prison terms for engaging in a brazen investment fraud scheme that swindled more than $1 million from approximately 40 victims, causing some of them to lose their homes and financial security while the couple spent the money primarily on themselves.

JAMES PILON was sentenced today to 53 months in prison, while his wife, VERNA PILON, was sentenced last week to 78 months in prison, and they were ordered to pay $967,702 in restitution.

The couple “lived a life of ease while others were being pushed out onto the streets,” U.S. District Judge Virginia Kendall said today in imposing sentence for James Pilon, 68, of Joliet.

His lower sentence resulted primarily from an early guilty plea to the fraud scheme, and he was ordered to begin serving his sentence on Nov. 7, 2012.

Verna Pilon, 59, who has been in federal custody since 2010, pleaded guilty to the fraud scheme on the second day of trial in May of this year after eight victims testified against her.

“The victims in this case were hard-working individuals who did not have money to spare, and indeed, many refinanced their homes in order to make an investment with the defendants,” said Gary S. Shapiro, Acting United States Attorney for the Northern District of Illinois, who announced the sentences with William C. Monroe, Acting Special Agent-in-Charge of the Chicago Office of the Federal Bureau of Investigation.

The Will County State’s Attorney’s Office and the Monee Police Department assisted in the investigation.

According to court records, the investigation of the Pilons, of Monee at the time, began in 2005 when the Illinois Securities Department ordered them to cease selling investments in the state. Instead of complying, the couple continued to solicit and obtain investment funds through 2005 and 2006.

The couple operated numerous businesses through which they purported to sell two forms of investment —

• the Mortgage Acceleration Program, which essentially promised to pay investors’ monthly mortgage payments, completely pay off the outstanding balance in two years, and generate additional returns, and
• the Private Placement Program, which also promised high-yield returns of as much as 100 percent or more on investments within 90 days.

In fact, neither investment program existed and the Pilons used some funds they fraudulently obtained to make Ponzi-type payments to lull some investors, while using the remaining funds for themselves.

As a result, some investors’ mortgage payments were never made and their homes were foreclosed.

Among the funds the Pilons spent on themselves were

• $14,000 for a diamond ring,
• $54,000 for a Cadillac SUV, and
• $125,000 for the down payment on a California residence once owned by tennis player Andre Agassi.

They used additional funds to pay off their bankruptcy debts and to pay for restaurants, hotels, and airline tickets.

During court proceedings, Verna Pilon was identified as a member of the so-called Washitaw nation sovereign group and she repeatedly maintained that the U.S. District Court had no jurisdiction over her.

Evidence showed that the Pilons were acquainted with many of their victims, including some who testified that the couple preyed upon their religious faith in appealing for investment funds.

The government was represented by Assistant U.S. Attorneys Sunil Harjani and Bolling Haxall.

Today’s announcement is part of efforts underway by the Financial Fraud Enforcement Task Force (FFETF), which was created in November 2009 to wage an aggressive, coordinated and proactive effort to investigate and prosecute financial crimes. With more than 20 federal agencies, 94 U.S. Attorneys’ Offices, and state and local partners, it’s the broadest coalition of law enforcement, investigatory and regulatory agencies ever assembled to combat fraud. Since its formation, the task force has facilitated increased investigation and prosecution of financial crimes; enhanced coordination and cooperation among federal, state and local authorities; addressed discrimination in the lending and financial markets, and conducted outreach to the public, victims, financial institutions and other organizations. Over the past three fiscal years, the Justice Department has filed more than 10,000 financial fraud cases against nearly 15,000 defendants, including more than 2,700 mortgage fraud defendants. For more information on the task force, visit www.stopfraud.gov.

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

HUNTLEY MAN SENTENCED TO 45 MONTHS IN PRISON FOR DEFRAUDING HIS FRIENDS AND ACQUAINTANCES OUT OF MORE THAN $1,000,000

Rockford — A Huntley, Ill. man was sentenced today in federal court to 45 months in federal prison on his conviction for wire fraud. From 1995 through January of 2012, Frank L. Beaudette, 61, fraudulently obtained loans totaling more than $1,000,000 from at least 25 individuals by making false representations about the purpose for which he needed their money.

Beaudette pleaded guilty to the federal wire fraud charge on December 29, 2011.

In his plea agreement, Beaudette admitted that he usually attempted to befriend his victims.

Then, after he gained their confidence, Beaudette persuaded his victims to lend him money.

On most occasions, Beaudette falsely told his victims he had a “friend” in the computer business who needed capital to complete a large sale of computer equipment.

Beaudette then persuaded the victims to loan money to him so that he could provide the money to his “friend” for the computer transaction.

In return, Beaudette gave the victims personal promissory notes, promising to repay their principal together with large amounts of interest.

As he acknowledged in the plea agreement, however, Beaudette did not have a friend who was selling computers.

Instead Beaudette spent all of the victims’ funds on his own personal expenses.

Beaudette also admitted that when the promissory notes came due, he falsely told the victims he could not repay the loans because his “friend” had been unable to collect what was owed after the computer sale transaction.

Beaudette often promised the victims that he would repay them with profits earned from a business he owned.

Specifically, Beaudette told these victims that he owned a business known as “Thunderbird Aviation,” which allegedly brokered sales of airplanes.

Beaudette frequently promised his victims that he would repay the loans with profits from upcoming airplane sales transactions.

Beaudette further acknowledged that he caused some of his victims to provide additional funds to him by telling them that he needed these additional monies until Thunderbird Aviation could complete a purported upcoming airplane sale.

Today’s sentencing hearing was conducted by United States District Judge Frederick J. Kapala.

In addition to the 45 month federal prison sentence, Judge Kapala also ordered Beaudette to pay $1,050,809.92 in restitution to the victims of his crime. Beaudette will not be eligible for parole on his prison sentence.

The investigation was conducted under the auspices 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.

The sentencing was announced today by Gary S. Shapiro, Acting 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 Illinois Secretary of State Jesse White.

The government was represented by Assistant U.S. Attorney Scott A. Verseman.

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

CHICAGO MAN INDICTED FOR ALLEGEDLY CAUSING 15 INVESTORS TO LOSE APPROXIMATELY $600,000 IN PONZI-TYPE FRAUD SCHEME

CHICAGO — A Chicago man who operated an investment trading pool allegedly fraudulently obtained approximately $1.4 million and caused some 15 individual investors to lose about $600,000, federal law enforcement officials announced today.

The defendant, Christopher Varlesi, was charged with six counts of mail and wire fraud in an indictment returned yesterday by a federal grand jury.

Varlesi allegedly misappropriated a substantial portion of investor funds for his own benefit, including misusing $99,750 in May 2010 to pay for a year’s rent for an apartment in the Trump International Hotel & Tower in Chicago, and to make Ponzi-type payments to other investors.

Varlesi, 53, of Chicago, will be arraigned at a later date in U.S. District Court.

He was the sole proprietor of Gold Coast Futures & Forex, which purported to buy and sell securities and commodities and operate a pool of investor money for trading purposes, but was not actually registered or licensed to do so.

The indictment seeks forfeiture of approximately $600,000.

The charges were announced by Patrick J. Fitzgerald, 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 Illinois Securities Department assisted in the investigation, as did the Commodity Futures Trading Commission, which filed a civil enforcement lawsuit against Varlesi in March of this year.

According to the indictment, between July 2008 and January 2012, Varlesi made

• false representations to clients about using their money to trade gold, Commodity futures and foreign currency,
• the expected return on their investments, and
• the security of their money.

He fraudulently retained investors’ funds and concealed the scheme by creating and distributing false account statements and making Ponzi-type payments to investors, the charges allege.

Varlesi also allegedly told clients that their investments were guaranteed to be profitable, with no risk of losing principal.

As part of the scheme, the charges allege that he provided promissory notes to certain investors, falsely promising to return the entire principal amount of their investment, as well as guaranteed interest ranging between 5 to 7.5 percent per month.

The government is being represented by Assistant U.S. Attorney Sarah E. Streicker.

Each count of wire and mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, and restitution is mandatory. The Court may also impose a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The investigation 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.

An indictment contains only charges and 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:

McHENRY COUNTY BUSINESSMAN PLEADS GUILTY TO $7 MILLION FRAUD

ROCKFORD — A Woodstock, Ill., man pleaded guilty today in federal court in Rockford to conducting a $7 million mail fraud scheme. Francis X. Sanchez (“Sanchez”), 51, co-owned and operated a business in McHenry County, known as InvestForClosures, with his business partner James D. Bourassa. In his guilty plea today, Sanchez admitted that he fraudulently obtained more than $7 million from InvestForClosures’ investors.

Sanchez’s and Bourassa’s business was initially known as InvestForClosures.Com, but later changed its name to InvestForClosures Financial, LLC. According to Sanchez’s plea agreement, he represented to potential investors that this business bought distressed houses, rehabilitated those houses, and sold the houses for a profit.

Sanchez admitted in his plea agreement that he, Bourassa, and their employees solicited people to invest in InvestForClosures.Com and InvestForClosures Financial. Sanchez acknowledged that he and his employees made various representations to their potential investors, including:

1. their investments would be safe because they would be backed by real estate;
2. InvestForClosures used the majority of their investors’ funds to purchase real estate; and
3. because of the business’ efficient cash flow from buying and selling houses, InvestForClosures Financial had never failed to make an interest payment on time or return an investor’s principal when requested.

As Sanchez admitted today, each of these representations was false.

First, the business did not own sufficient real estate to secure all of the investments.

Secondly, the business did not use the majority of investor funds to purchase real estate, but instead used most of the investors’ funds to pay other expenses, including the salaries of the defendants, and to pay Ponzi type interest to prior investors.

In addition, InvestForClosures was not making enough money from property sales to pay the interest owed to the investors, but was instead using cash received from new investors to pay the prior investors with Ponzi type payments.

Sanchez further admitted that, in order to conceal from the investors his false promises and misrepresentations, and to prevent the investors from demanding the return of their principal, he told the investors that he was developing an exclusive, luxury, residential community in Mexico known as the “Sands of Gold.”

Sanchez and Bourassa formed a new business, known as InvestForClosures Ventures, LLC, doing business as Realty Opportunities International, to operate the Sands of Gold project. Sanchez acknowledged that he and Bourassa solicited their investors to purchase lots at Sands of Gold and to invest additional monies with InvestForclosures Ventures.

Sanchez admitted that he made several misrepresentations to his investors regarding Sands of Gold, including:

1. the government of Mexico had promised to invest millions of dollars in infrastructure necessary for the development of the Sands of Gold;
2. efforts to obtain financing for the project were going well and a financing deal was imminent; and
3. they were finishing negotiations with a major hotel chain for the construction of a hotel at Sands of Gold.

Sanchez further admitted that, during the course of the scheme, he and co-defendant Bourassa fraudulently obtained approximately $7,238,506.40 from the investors.

Of this amount, approximately $1,711,711.18 was paid back to the investors through Ponzi type payments.

The indictment, which was filed on November 16, 2010, charged both Sanchez and Bourassa with mail fraud and wire fraud. Bourassa pled guilty to mail fraud on February 27, 2012.

The sentencing hearing for Sanchez will be conducted on August 13, 2012, at 9:00 a.m.

Bourassa will be sentenced on June 11, 2012, at 9:30 a.m.

Mail fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, or a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater, as well as restitution to the victims. The actual sentences will be determined by the United States District Court, guided by the advisory United States Sentencing Guidelines.
The case was investigated by the Rockford Office of the Federal Bureau of Investigation, the Chicago Office of the United States Postal Inspection Service, and the Illinois Secretary of State’s Securities Department. The investigation was conducted under the auspices 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

The guilty plea was announced by 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; Thomas P. Brady, Postal Inspector-In-Charge of the Chicago Division of the U.S. Postal Inspection Service, and Illinois Secretary of State Jesse White.

The government is being represented by Assistant U.S. Attorney Scott A. Verseman.

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

CHICAGO INVESTMENT ADVISOR INDICTED FOR ALLEGEDLY CAUSING CLIENTS TO LOSE $1.5 MILLION IN FRAUD SCHEME

CHICAGO — A Chicago investment advisor allegedly engaged in an investment fraud scheme that swindled clients, causing them to lose approximately $1.5 million, federal law enforcement officials announced today.

The defendant, Dimitry Vishnevetsky, was charged with eight counts of mail or wire fraud and one count of bank fraud in a nine-count indictment returned yesterday by a federal grand jury.

Vishnevetsky allegedly raised approximately $1.7 million from investors and misappropriated at least $1.5 million for his own purposes, including to pay for such business and personal expenses as

• mortgage and car payments,
• travel and vacations,
• restaurant bills,
• athletic club dues, and
• to make trades for his own benefit,

while using additional investor funds to make Ponzi-type payments to clients.

Vishnevetsky, 33, of Chicago, will be arraigned at a later date in U.S. District Court.

Patrick Fitzgerald

The charges were announced by Patrick J. Fitzgerald, 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. Also yesterday, the Commodity Futures Trading Commission filed a civil enforcement lawsuit against Vishnevetsky and his companies in Federal Court in Chicago.

According to the indictment, Vishnevetsky offered and sold investments, including commodities and promissory notes, primarily through Hodges Trading, LLC, and Oxford Capital, LLC, which purported to be in the business of providing brokerage/management services to investors and of managing commodities funds, including

• the Oxford Global Macro Fund,
• the Oxford Global Arbitrage Fund, and
• the Quantum Global Fund, which existed in name only.

He also offered and sold promissory notes, described as London Interbank Offered Rate (LIBOR) adjusted notes, through Hodges Trading, which also existed in name only.

The indictment alleges that between September 2006 and March 2012, Vishnevetsky schemed to defraud investors and potential investors by making false representations about

• the profitability of his prior and current trading,
• the use of the invested funds,
• the risks involved,
• the expected and actual returns on investments and trading, and
• false representations about Hodges Trading, Oxford Capital and the commodities funds.

For example, Vishnevetsky created and provided some investors fraudulent trading results showing profits as high as 36 percent per year, the indictment alleges.

“In fact, to the extent that Vishnevetsky engaged in trading, the trading consistently resulted in net losses, not profits,” the indictment states.

The bank fraud count alleges that between 2007 and 2010, Vishnevetsky made false statements to Merrill Lynch Bank & Trust concerning his income and assets to cause the bank to issue, and later modify, two loans totaling approximately $519,500 to purchase a condominium in Chicago. Vishnevetsky subsequently stopped making payments on the loans, the charges allege.

The government is being represented by Assistant U.S. Attorney Jacqueline Stern.

Each count of mail or wire fraud carries a maximum penalty of 20 years in prison and a $250,000 fine, while bank fraud carries a maximum penalty of 30 years in prison and a $1 million fine, and restitution is mandatory. The Court may also impose a fine totaling twice the loss to any victim or twice the gain to the defendant, whichever is greater. If convicted, the Court must impose a reasonable sentence under federal sentencing statutes and the advisory United States Sentencing Guidelines.

The investigation 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.

An indictment contains only charges and 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:

TWO PRINCIPALS OF COLLAPSED FOREIGN CURRENCY TRADING FIRM SENTENCED TO FEDERAL PRISON FOR $17 MILLION FRAUD SCHEME

CHICAGO — Two principals of a foreign currency trading firm that collapsed in 2007 were sentenced to 17 years and 12½ years in federal prison, respectively, after pleading guilty to fraud charges for operating a Ponzi-type scheme that diverted millions of dollars to themselves to finance lavish lifestyles and that caused more than 1,000 victim investors worldwide to lose nearly $17 million.

Charles G. Martin, 46, formerly of Glencoe, Ill., and Malibu, Calif., was sentenced today to 204 months, while John E. Walsh, 63, of Lake Forest, Ill., was sentenced yesterday to 150 months in prison.

Both men were arrested and charged in January 2009 and subsequently cooperated with the government and pleaded guilty in May 2011 to wire and commodities fraud and tax evasion counts.

Patrick Fitzgerald

The sentences were announced by 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 Alvin Patton, Special Agent-in-Charge of the Internal Revenue Service Criminal Investigation Division in Chicago.

The sentences were imposed by U.S. District Judge Virginia Kendall, who also ordered mandatory restitution of $16,976,554, jointly and severally, against both defendants.

The judge also granted a forfeiture judgment against Walsh for $10 million and indicated that she will enter a similar order against Martin.

The government has so far recovered in excess of $1 million from the liquidated proceeds of the defendants’ seized assets and personal property, as well as from bank accounts, safety deposit boxes, and third-party recipients of fraudulently-obtained funds.

Walsh was ordered to begin serving his sentence on March 28 and Martin on March 29.

Martin and Walsh were principals of One World Capital Group, LLC, which was formed in 2005, and was based in Winnetka, Ill., with an office in New York.

In December 2007, the Commodity Futures Trading Commission obtained a court order prohibiting further trading activity and freezing the firm’s remaining assets, which totaled $677,932.

At the same time, One World had approximately $17,654,486 in unpaid customer liabilities. The CFTC and the National Futures Association assisted in the investigation.

According to the court documents, Martin acted as a principal of One World, even though he was prohibited from holding such a position with a National Futures Association member, and Walsh served as the president and primary manager of the trading firm.

They marketed over the counter foreign currency (“forex”) trading services in which they were to serve as the customers’ counterparty. In reality, however, One World’s trading platform operated as a front to placate customers whose margin funds were being systematically misappropriated by them.

They concealed the misappropriation from customers, as well as government and industry regulators, by making false representations.

For example, they solicited new customers without telling them that the value of their investments with One World would be immediately diminished upon deposit due to a shortfall in One World’s customer trading account.

The defendants used customer funds they misappropriated to finance extravagant lifestyles.

Credit card and bank records show that Martin spent

• more than $1 million at a strip club and restaurants,
• nearly $1 million at elite hotels and
• another $1 million renting flight time on private jets.

He purchased a fleet of luxury vehicles, donated hundreds of thousands of dollars to celebrity charity events, and hired personal security guards to accompany him in public.

Similarly, Walsh used his One World credit card to charge personal expenses, including more than $140,000 of jewelry. He also used $70,000 in One World funds for country club expenses and $1,425,000 to purchase a second home in Lake Forest.

In January 2009, federal agents searched Martin’s residence on Sheridan Road in Glencoe and Walsh’s residence on Wharton Drive in Lake Forest, and seized dozens of items from Martin, including fine watches and jewelry, antique furniture, oriental rugs, a piano, artwork, and various high-end electronics.

From Walsh, agents seized jewelry, cash proceeds from the sale of his former residence on Salisbury Lane in Lake Forest and a BMW that he transferred to his son.

In addition to the luxury items they lavished upon themselves, bank records showed that Martin and Walsh spent significant amounts of funds diverted from One World to help finance the production of a motion picture that had listed Martin as a contributing producer. In 2007, bank records show that Martin and Walsh spent more than $500,000 on the movie.

The government is being represented by Assistant U.S. Attorney Joel Hammerman.
http://www.StopFraud.gov The case 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.